Fed expected to cut rates this week as labor market softens

Fed expected to cut 25 bps Oct. 28–29 to 3.75% - 4% as inflation cools to 3% and hiring slows; markets price in a possible December cut.

Major brokerages predict the Fed will lower interest rates by 25 basis points at its last two 2025 meetings, starting Wednesday, as inflation eases and the labor market softens. Bank of America Global Research expects only one cut. Prediction markets on Kalshi also show strong consensus, with 97% of votes anticipating a 25-basis-point cut.

A quarter-point cut in September marked the first easing of 2025. Another 25-basis-point reduction this week would take the federal funds target range to 3.75%-4%.

Price pressures have moderated. Consumer prices rose 0.3% in September from the prior month and 3% from a year earlier. Rising unemployment insurance claims and slower hiring indicate cooling labor demand. With some official data delayed during a federal government shutdown, investors have focused on inflation and claims figures. Pricing in futures markets suggests odds of another reduction in December.

Officials have emphasized a data-dependent approach and have not committed to a preset path. Powell has warned of “no risk-free path,” noting that cutting too aggressively could risk reigniting price pressures even as growth slows.

As GNcrypto covered previously, minutes from the Fed’s September meeting showed most officials expected additional 2025 reductions after the initial 25-basis-point cut to a 4%-4.25% target range on Sept. 17, while one policymaker preferred a 50-basis-point reduction. The Committee reiterated its data-dependent stance and continued balance-sheet runoff. A desk survey pointed to a 25-basis-point cut at the next meeting, and roughly half expected another in October. The Fed’s remaining 2025 meetings are Oct. 28-29 and Dec. 9-10.

Analysts expect US Fed to cut interest rates by 25 basis points