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Markets Eye 25 bps Cut as Fed Grapples With Patchy Economic Data
Summary:
The Federal Reserve is expected to cut interest rates by 25 basis points to the 3.75%–4.00% range amid data gaps caused by the U.S. government shutdown. With key reports like the September jobs data unavailable, policymakers face uncertainty over inflation and employment trends. Markets await Jerome Powell’s remarks for clues on future policy, as the Fed balances slowing growth with fragile labour market conditions.
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Analysts and investors almost universally expect the Fed to trim its policy rate by 25 basis points, moving it into the 3.75 %-4.00 % range, as the Jerome Powell-led Federal Reserve weighs its next policy move, taking into account various economic signals from across the U.S. economy.
As the Federal Reserve prepares to cut its benchmark interest rate at its two-day meeting ending Wednesday, policymakers are navigating murky economic waters — partly because the U.S. government shutdown has deprived them of key data.
The 29-day shutdown has halted publication of the September jobs report, a cornerstone in monitoring the labour market, complicating the Fed’s ability to assess hiring trends and workforce dynamics. While the unemployment rate had crept up to 4.3 % through August, the pace of hiring had already slowed significantly. Meanwhile, inflation data offers mixed signals: the Consumer Price Index (CPI) for September unexpectedly slowed as housing inflation softened, offsetting rises in gas and tariff-affected imported goods.
With no new economic projections to be released at this meeting, all eyes will be on Fed Chair Jerome Powell’s commentary. Markets will scrutinise not just the cut, but the wording of the statement and the tone of Powell’s press conference — vital for clues on what lies ahead for December and beyond.
If the data gaps persist, the Fed may find itself navigating uncertain terrain well into the year-end, balancing modest inflation progress with fragility in the labour market and constrained visibility on overall economic momentum.
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