Rate Reduction Expected, Yet Powell's Conference May Hinder Further Easing

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Rate Reduction Expected, Yet Powell's Conference May Hinder Further Easing

Bitget-RWA2025/10/29 13:24

By:Bitget-RWA

- The U.S. Federal Reserve plans a 25-basis-point rate cut to 3.75-4.00%, driven by weak labor data and delayed economic reports from the government shutdown. - Markets expect the cut (98.3% probability) but watch for "hawkish surprises" in Powell's presser about future easing pace and inflation risks. - Global markets react: BoE faces 68% December cut odds, while ECB and BOJ decisions could reshape cross-asset flows this week. - Uncertainty lingers over QT timeline and Powell's rhetoric, which could sway

The U.S. Federal Reserve is expected to reduce interest rates by 25 basis points during its upcoming two-day meeting, bringing the federal funds rate down to a range of 3.75-4.00%, as outlined in a

MarketScreener preview

. The announcement, scheduled for October 30, comes as the economy faces sluggish job growth, an extended government shutdown, and mounting worries over inflation. Although the rate cut is largely anticipated, analysts are paying close attention to Fed Chair Jerome Powell’s post-meeting press conference, which could deliver a “hawkish surprise” and provide clues about the pace and length of future rate reductions, according to the

Manila Times report

This move by the Fed follows softer inflation readings and continued weakness in employment, with private sector data such as the ADP and ISM reports underscoring ongoing labor market challenges, as mentioned in the MarketScreener preview. Experts from Allianz Research and

Bank of America

have both pointed out that labor market fragility remains the Fed’s chief concern, even as inflation stays above the 2% goal, as reported by

Yahoo Finance

. The government shutdown, now entering its fourth week, has postponed the release of key economic indicators, forcing the Fed to turn to alternative data sources to gauge the economy, according to the

Bond Buyer

Rate Reduction Expected, Yet Powell's Conference May Hinder Further Easing image 0

Traders are almost certain a rate cut will happen this week, with the CME FedWatch tool indicating a 98.3% chance, according to

TradingView

. Markets are also factoring in another possible cut in December, though there is still uncertainty regarding the Fed’s approach to quantitative tightening (QT). Some economists, such as EY’s Gregory Daco, believe the Fed will keep its options open for future cuts, while others, including analysts at J.P. Morgan, anticipate the central bank could announce the conclusion of QT at the December meeting, as previously covered by the Manila Times and the Bond Buyer.

The upcoming press conference is expected to be crucial, with Powell likely to discuss the trade-off between inflation and employment risks. Recent remarks from former Fed officials like Loretta Mester indicate that the central bank remains wary of inflation rising, despite the current trend toward rate reductions, as noted by the Manila Times. At the same time, ongoing U.S.-China trade negotiations and the broader international economic climate add further complexity, with tensions and tariffs between the two countries influencing investor sentiment, according to Yahoo Finance.

Investors will be closely monitoring the Fed’s outlook for future monetary policy. While markets are currently expecting two more rate cuts in 2025 and as many as three in 2026, a

TradingView analysis

pointed out that Powell’s comments could shift these expectations. A dovish message might boost riskier assets, whereas a more hawkish tone could lead to increased volatility in both bond and stock markets. The S&P 500 has reached new highs ahead of the anticipated cuts, fueled by optimism over trade progress and strong tech sector earnings, according to the TradingView analysis.

The Fed’s actions are also expected to impact global financial markets. The Bank of England (BoE) is facing growing expectations for a rate cut, with traders assigning a 68% likelihood to a move in December, according to

FXStreet

. Meanwhile, attention will also turn to the European Central Bank and the Bank of Japan later in the week, as their policy decisions could influence cross-market flows, as discussed in the MarketScreener preview.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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