The Federal Reserve is anticipated to cut interest rates by a quarter of a percentage point at its much-anticipated upcoming two-day meeting, even as policymakers face a dearth of fresh economic data.
A weeks-long government shutdown has left officials without a series of key indicators normally used to help calibrate rates, including the monthly gauge of nonfarm payrolls.
However, members of the rate-setting Federal Open Market Committee do have the consumer price index for September, whose release was delayed until Friday. The gauge of inflation was slightly cooler than anticipated.
Last month, the Fed slashed borrowing costs by 25-basis points to a range of 4% to 4.25%, citing a need to prioritize supporting an easing U.S. labor market over signs of sticky inflation. In theory, lowering rates can spur investment and hiring, albeit at the risk of driving up price gains.
Several FOMC members, including Chair Jerome Powell, have broadly indicated that they will continue to focus on bolstering the employment picture -- although without much of the latest data, the economic outlook remains somewhat murky.
Still, markets are now all but certain that a further reduction will be rolled out at the conclusion of the central bank’s October 28-29 gathering, according to CME’s closely-monitored FedWatch Tool. Another quarter-point drawdown is also seen coming at the Fed’s following meeting in December.
No summary of economic projections will be provided by the Fed at its next meeting, meaning that markets will likely be taking some direction from Powell’s press conference after the meeting, analysts at BofA Securities said.
