Everything You Need to Expect Ahead of Jerome Powell’s Upcoming Interest Rate Decision

• The FOMC is 97% likely to cut rates below 4% on October 29, per CME data.
• The government shutdown has delayed key data, forcing reliance on alternate indicators.
• Two more rate cuts are expected by year-end as the Fed prioritizes jobs over inflation risks.

The Federal Open Market Committee (FOMC) is on track to cut interest rates below 4% at its October 29 meeting, according to futures data from the CME FedWatch Tool, which shows a 97% probability of a reduction. The move would bring the federal funds rate down from its current 4.00–4.25% range to 3.75–4.00%, marking the Fed’s first move toward a more accommodative stance since midyear.

Forecasting markets echo this sentiment, and the Fed’s own September projections suggest at least two more cuts before the end of 2025. However, a smaller group of policymakers remain cautious, signaling they’d prefer to hold rates steady given lingering inflation concerns.

Shutdown Delays Key Data for Fed Decision

The ongoing U.S. government shutdown has complicated the Fed’s decision-making process by delaying the release of key economic data, including employment and inflation reports. Without those official updates, the central bank is expected to rely on private sector indicators and real-time data to gauge the health of the economy.

Early readings point to a softening labor market and mild inflationary pressures driven partly by tariffs. The shutdown itself could also weigh on GDP growth, adding to the case for a rate cut. In this environment, Fed officials appear ready to ease policy to support jobs, even as inflation remains slightly above the 2% target.

Rate Path Through 2025

If the Fed follows through with an October rate cut, it would likely be followed by another move at its final meeting of 2025 on December 9–10. Based on current forecasts, the federal funds rate could fall closer to 3% by mid-2026, returning monetary conditions to a more neutral stance after nearly two years of tightening.

Analysts note that this measured approach is meant to balance risks — offering relief to the labor market without reigniting inflation. Fed Governor Michael Barr summarized the tension in a recent speech:

“There was, and remains, considerable uncertainty about the future course of the economy. It is possible that recent low payroll growth is a harbinger of worse to come… but it is also possible that both inflation and expectations of future inflation escalate.”

The Tightrope Between Jobs and Inflation

The Fed’s current challenge lies in managing the trade-off between stable prices and full employment. While inflation remains slightly above the target, signs of labor market cooling — including slower hiring and declining job openings — have shifted the Fed’s focus toward protecting growth.

However, should inflation accelerate in response to tariffs or energy costs, further cuts could become harder to justify. The FOMC’s next two meetings — in October and December — will therefore set the tone for how aggressively the Fed plans to recalibrate policy in 2026.

In short, while rate relief is almost certain, the bigger question is whether it will be enough to cushion the economy from the dual strain of a prolonged shutdown and fragile job market — without reigniting inflation in the process.