After the Fed’s aggressive 50 basis-point rate cut in September, it has been the hope of many that another will be announced in the next Fed meeting. However, economic data since the cut may indicate a milder, 25 basis-point cut is more likely. The Fed’s main goal with beginning to cut rates was to prevent any further decay in the labor market, so far this is going decently well and the need for aggressive rate cutting may not be there. Strategists at TD Securities wrote in a client report, "The Fed is likely to cut only 25 bp in the absence of a further sharp deterioration in the labor market,"

The image above is of the Chicago Mercantile Exchange’s Fedwatch Futures instrument on the morning of October 3rd, it currently shows that traders are pricing in only a 33.3% chance of a 50 basis-point cut at the November 7th meeting, while they are pricing in a 66.7% chance of a smaller 25 basis-point cut. This tool updates daily and is an excellent instrument to use to see what the expectations of the market are for prospective rate cuts.

As always, the data in the coming weeks will ultimately determine the Fed’s decision. If we see the labor market start to deteriorate further than an aggressive rate cut will most likely be the course they will take. If the labor market continues to hold strong and heal, a mild 25 basis-point cut would make the most sense.