This week will mark the final monetary policy meeting of the year for the U.S. Federal Reserve (Fed), where a rate cut is widely anticipated.
On the domestic front, the market watchers will be similarly waiting for the Monetary Policy Committee (MPC) meeting of the Turkish central bank, which, as inflation is falling, is also expected to deliver another cut.
The U.S. central bank, at its Federal Open Market Committee (FOMC), will decide on the course of the policy rate, following its 25-basis-point cut in October. At the time, it lowered its benchmark overnight borrowing rate to a range of 3.75%-4%.
Despite limited data due to the government shutdown and differences of opinion among officials, expectations for a cut are prevailing.
After the longest government shutdown in the country's history ended on Nov. 12, institutions updated their data calendars, but critical data such as the October employment report and inflation could not be published because some data could not be collected during the shutdown.
"A rate cut would come despite U.S. consumer price inflation having accelerated to 3.0% in September and despite concerns that the pass-through of tariffs could also exert further inflationary pressures, as indicated by business survey price gauges," S&P Global said in its "week ahead preview."
"Furthermore, business activity indicators, such as the ISM surveys and PMI from S&P Global, hint at robust fourth quarter GDP growth. However, the case for lower rates lies largely with the labor market, especially after the ADP payroll report signalled falling private sector jobs," it added.
Data by the ADP Research Institute showed that private sector employment in the country fell by 32,000 in November, contrary to expectations of an increase. This was the largest decline in private sector employment since March 2023.
Data by consulting firm Challenger, Gray & Christmas also showed that the number of layoffs announced by U.S.-based employers rose to 71,321 in November, a 24% increase year-on-year, despite declining compared to the previous month.
Layoffs rose 54% in the first 11 months of the year compared to the same period last year, reaching 1.170 million, or 1,170,821 to be exact.
Since the U.S. government reopened, less data is available regarding the inflation outlook.
The U.S. Producer Price Index (PPI), on the other hand, rose 0.3% on a monthly basis and 2.7% on an annual basis in September, in line with expectations.
At the Fed's last meeting on Oct. 28-29, the decision to cut interest rates by 25 basis points was taken by a vote of 10 to two.
Fed board member Stephen Miran voted for a 50-basis-point rate cut, while Kansas City Fed President Jeffrey Schmid voted to keep the policy rate unchanged.
Hawkish Fed officials oppose rate cuts as part of the fight against inflation and support tighter monetary policy, while doves want rate cuts to continue, citing the weakening labor market.
The minutes of the FOMC's October meeting also reveal that Fed officials are divided on interest rate cuts.
Following Fed Chair Jerome Powell's remarks indicating that a rate cut in December was not certain, markets began pricing in the possibility that the policy rate would remain unchanged this month.
However, recent comments from leading Fed officials also reflected support for cutting again because of a weakening labor market, even though inflation is still above the Fed's 2%.
"Usually, as you get closer to a policy meeting, it becomes quite apparent and transparent what the Federal Open Market Committee is going to do," said Nationwide Chief Economist Kathy Bostjancic, referring to the Fed's rate-setting committee.
"This time is very different," she told Agence France-Presse (AFP).
The Central Bank of the Republic of Türkiye (CBRT) is also set to convene for its meeting on Dec. 11, with most of the analysts expecting it would deliver another cut after it lowered rates by 100 bps in October.
The annual inflation rate in Türkiye in November was down more than expected to around 31%, while the month-over-month increase was below 1% for the first time since 2023, bolstering the prospects for another cut.
The figure, which had reached as high as 75% in May 2024, is now at its lowest level since November 2021, when it was 21.31%.
"The central bank will likely remain cautious with a measured 100bp cut in the December MPC, in our view, though we should not rule out the possibility of a larger hike," the ING analysts said following inflation data.
Some economists pointed out that the latest inflation reading reaffirmed that the bank is all but sure to cut rates again. The private expectations vary from a 100 bps to a 200 bps cut.
However, CBRT Governor Fatih Karahan at an event this week suggested that "interest rate cuts can only be effective when inflation is under control."
The central bank's end-2025 inflation interim target stands at 24%, with its forecast range at 31%-33%.
