The US Federal Reserve is widely anticipated to cut interest rates by a quarter point in its upcoming meeting on Wednesday, October 29, following softer-than-expected CPI data last week—bringing out its policy bazooka for the second time since September.
Analysts said the central bank is almost certain to reduce the benchmark Fed funds rate to a range of 3.75%–4% from the current 4%–4.25%, with traders also anticipating another cut in December.
Signs of a slowdown in the job market and easing domestic prices, analysts believe, could give the Fed additional room for further rate cuts.
The US Consumer Price Index (CPI), released last week, rose 0.3% month-on-month in September, putting the annual inflation rate at 3%, both lower than expected. CPI was the only official economic data allowed to be released during the ongoing government shutdown — now the second longest in US history.
Meanwhile, climbing unemployment insurance claims suggest that labor market demand continues to cool, even as the shutdown delays the publication of most official economic statistics, including the unemployment rate, last estimated at 4.3% in August.
Analysts expect a measured approach from the Fed
According to Mr. Jigar Trivedi, Senior Research Analyst at Reliance Securities, markets currently “almost certain” (around 95–98% probability) expect the Fed to cut the federal funds rate by 25 basis points at the October meeting, bringing the target range to 3.75%–4.00%.
Trivedi noted that the labour market is showing signs of softening, private data indicate job growth has slowed materially, and Fed Chair Jerome Powell has himself said that downside risks to employment appear to have risen.
He added that inflation, while elevated relative to the Fed’s 2% target, has shown some moderation (e.g., headline CPI rose 3.0% in September year-on-year), which gives the Fed some room to ease.
However, Trivedi cautioned that despite the expectation of a cut, the Fed is signalling caution: it consistently emphasises “meeting-by-meeting” data dependence, and some officials remain wary about cutting too fast given inflation risks.
He further explained that market expectations are very high for the cut and for multiple cuts this year; if the Fed disappoints (by cutting less or signalling fewer cuts), markets could react negatively (in equities, bonds, and other risk assets).
Policy caution to continue
The Trump administration has been vocal in its demand for lower interest rates, keeping Powell under political pressure even as divisions persist within the Fed’s policymaking ranks. Since September’s decision, several Fed policymakers have called for caution on policy easing, citing worries about inflation that has been well above the Fed’s 2% target for the last several years.
Fed Chair Jerome Powell and his colleagues have maintained a cautious tone about the pace of rate cuts, balancing inflation risks against labor market weakness. Trump, on the other hand, has argued that inflation is no longer a concern and has urged the Fed to cut rates more aggressively.
After pausing its rate-cutting cycle for five consecutive meetings amid fears that Trump’s economic policies could have severe repercussions, the Fed delivered its first rate cut of 2025 in September.
Powell described the move as a risk-management measure responding to a softening labor market and reiterated that the central bank would continue to assess policy “meeting by meeting.”
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