The meeting, which began Tuesday morning in Washington, will conclude with a decision announcement at 11:30 pm, followed by Fed Chair Jerome Powell’s press conference. A rate cut would bring the benchmark federal funds rate down to the 3.75–4% range, marking the second consecutive reduction this year.
What to expect
According to ICICI Direct, the rate cut is “widely expected” following the softer-than-anticipated inflation print in the latest US consumer price data.
“US Treasury yields traded mixed ahead of the meeting, with 10-year yields hovering near 4% and the 2-year yield settling around 3.48%. Meanwhile, the ongoing US government shutdown has capped any major upside in the dollar,” the brokerage said.
Economists say the decision reflects the Fed’s shifting focus from inflation to growth and jobs. “There’s genuine concern about the labor market right now,” said Sarah House, senior economist at Wells Fargo. “With policy still restrictive, easing a little makes sense — but the bigger question is what comes next.”Despite inflation remaining above the Fed’s 2% target, policymakers are expected to act preemptively to support employment, fulfilling the central bank’s dual mandate of maintaining price stability and maximizing job growth.
Five things to watch out for
1) The size of the rate cut
Markets have priced in a quarter-point cut, but any deviation — such as a larger move or a pause — could spark sharp market reactions in bonds and equities.
2) Forward guidance
Investors will look for hints on whether this marks the start of an extended easing cycle. Most brokerages, including Morgan Stanley and Goldman Sachs, expect another 25 bps cut before year-end, while BofA Global Research sees only one more reduction in 2025.
3) Quantitative tightening (QT):
Traders will closely monitor whether the Fed signals an early end to its balance sheet runoff, which would inject additional liquidity into the system.
4) Economic assessment
With limited official data available due to the shutdown, markets will study the Fed’s language on growth, jobs, and inflation, and how it interprets tariff-related price pressures.
5) Chair Powell’s tone:
Powell’s post-meeting remarks will be key in shaping expectations for 2026. Any acknowledgment of weaker labor trends or heightened global risks could reinforce the case for more rate cuts.
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