The U.S. Federal Reserve is widely expected to lower interest rates a further 25 basis points at the conclusion of its policy meeting today (Oct. 29).
Financial markets have priced in a nearly 100% probability that the U.S. central bank will approve a second consecutive 25 basis point reduction in the trendsetting federal funds rate.
That rate is currently set at 4% to 4.25%.
A majority of futures traders also expect the Federal Reserve to lower interest rates again at its meetings in December and January.
Expectations for interest rates to move lower come amid signs of largely benign inflation and evidence that the U.S. labour market is softening.
However, there are a number of issues that could cloud the central bank’s outlook for the U.S. economy and may alter the path of interest rates moving forward.
These issues include a lack of economic data being released during the U.S. government shutdown, evidence of a pullback in consumer spending, and an overheated stock market.
As always, U.S. Federal Reserve Chair Jerome Powell’s comments following the interest rate decision will be carefully watched and parsed by market observers.
A new survey of economists found that while nearly all of them expect the central bank to lower interest rates, less than 70% think rates should be cut given the amount of uncertainty related to the American economy.
The most recent data showed that inflation in the U.S. was at an annualized rate of 3% in September of this year, which is above the Federal Reserve’s 2% target.
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