Fed eyes 25-point cut as economy shows mixed signals

Federal Reserve Chair Jerome Powell said October 14 that the U.S. economy shows resilient growth while labor signals soften ahead of the central bank's Oct. 28-29 policy meeting. Markets expect a quarter-point rate cut.

Powell spoke in Philadelphia as official data remains limited by a federal shutdown, Reuters reports. The next inflation reading arrives October 24, four days before the meeting. Markets anticipate the target range will drop by 25 basis points, with another reduction possible in December.

The appearance marks Powell's last scheduled speech before the meeting. Officials are reviewing strong output and productivity data against weaker hiring signs. The Atlanta Fed's GDPNow model points to growth near 4% annualized while private employment indicators softened.

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Policymakers cut rates by 25 basis points in September to balance employment risks while maintaining pressure on inflation. September jobs data was delayed by the shutdown, forcing officials to rely on private indicators for hiring trends. The consumer price update arrives October 24.

Governor Christopher Waller said last week that "something's got to give," pointing to the gap between near-4% growth estimates and weak job readings. Philadelphia Fed President Anna Paulson said two more quarter-point cuts this year would be "appropriate," adding, "I don't want to step on a productivity boom."

The Fed is weighing how tariff and immigration policies could affect prices and employment. Forecasters cited by officials see inflation by the Fed's preferred measure staying above the 2% goal into 2026.

Powell weighs rate cut as growth, jobs, prices diverge