Maria Eloisa Capullo
(Bloomberg) — Two things are expected from this week’s Federal Reserve meeting: Officials will cut interest rates by a quarter of a percentage point and Chairman Jerome Powell will provide little guidance as widening differences among policymakers obscure the path forward.
Powell said earlier this month that the Federal Open Market Committee remained concerned about threats to the labor market. Then, last week’s delayed inflation report came in weaker than expected, potentially putting the Fed’s inflation hawks in a bind for now.
“Labor data continues to play a larger role in the debate,” said Krishna Guha, head of global policy and central bank strategy at Evercore ISI. Powell could continue to focus on employment and “return the Fed to a neutral policy stance” as long as officials are comfortable with inflation expectations and the level of price pressures on wages and services, he said.
The central bank’s rate decision will be announced in Washington at 2pm on Wednesday, along with a committee statement. Powell will hold a press conference in 30 minutes. The committee will not issue new forecasts at this meeting, nor will it issue an interest rate forecast.
Fed funds futures show investors believe a quarter-percentage point rate cut is almost a sure thing.
However, the high likelihood of a rate cut does not mean policymakers are nearly unanimous on the outlook for interest rates. A few continued to express concerns about inflation while acknowledging risks to the job market.
The consumer price index rose less than expected in September, but the core measure – which is considered a better guide to underlying trends in inflation – rose 3% year-on-year, a full percentage point above target.
What does Bloomberg Economics say…
“The FOMC plans to cut interest rates by 25 basis points at its October 28-29 meeting, but what is less certain is whether the committee will announce an end to quantitative tightening (QT). We do expect the FOMC to announce an end to QT, effective in November.”
——Anna Huang.
Some officials also pointed to continued high prices in areas of the economy such as services, which should be less affected by tariffs. In addition, the recent threat of new taxes on China and Canada has created new uncertainty about prices and the economic outlook.
As a result, the committee is likely to be more divided now than it was in September, when nine members favored at most one cut this year.
Against this backdrop, analysts expect Powell to avoid providing clear guidance on what to expect at the upcoming meeting. The lack of official economic data as the government shutdown continues only makes him more cautious.
“Hopefully the final data will help bridge the gap between the two camps,” said Matthew Luzetti, chief U.S. economist at Deutsche Bank Securities. But he added that Powell would not provide “signals about December or beyond” as long as the differences persist.
Stephen Miran, a Fed governor appointed by President Donald Trump, has said he will again oppose a half-percentage point rate cut. Among remaining voters, Kansas City Fed President Jeff Schmid is seen as a potential dissenter in favor of keeping interest rates on hold.
balance sheet
Fed watchers also believe it is increasingly likely that the committee will stop removing U.S. Treasuries from its $6.6 trillion balance sheet at this meeting. Officials have been seeking for months to shrink their portfolios as much as possible without draining too much liquidity from overnight funding markets.
Powell said earlier this month that the central bank could reach that level in the coming months, but currency markets have been showing signs of stress in recent weeks.
“Right now, we’re looking at the line between volatility and stress,” said Guneet Dhingra, head of U.S. rates at BNP Paribas. “I think the risk management side has made it very clear that they need to seriously consider ending” the runoff.
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Last modified: October 28, 2025
