Fed Poised for Second Straight Interest Rate Cut
Without fresh data, the Fed could choose to bring forward a rate cut originally anticipated for December to its late-October meeting.
Quick overview
- The ongoing U.S. government shutdown has delayed key economic data, complicating the Federal Reserve's decision-making on interest rates.
- Despite the lack of official data, Wall Street anticipates another rate cut due to slowing growth and a weakening labor market.
- Federal Reserve officials' speeches have become crucial for market guidance during the shutdown, as investors feel 'flying blind'.
- Stephen Miran, a Fed official, expressed optimism about inflation and suggested that the Fed may have room for further rate cuts.
Despite the ongoing U.S. government shutdown, recent remarks from Federal Reserve officials have taken on outsized importance as markets try to gauge the path of monetary policy.
With key economic data delayed due to the federal shutdown, the Fed faces the challenge of making its next rate decision without the usual macroeconomic support. While policymakers remain divided, Wall Street largely expects another rate cut—following the one in September—as investors bet that slowing growth and a weakening labor market will force the central bank’s hand.
The absence of official data has turned Fed speeches and sectoral signals into key guides for traders. The shutdown, now in its sixth day, has halted most federal agencies, leaving investors “flying blind.” The September jobs report was postponed, and upcoming releases on inflation and retail sales are also expected to be delayed.
Without fresh data, the Fed could choose to bring forward a rate cut originally anticipated for December to its late-October meeting. Still, with the inflationary effects of tariffs yet to fully materialize, a cut this month is not guaranteed.
Miran Hints at More Easing Ahead
Among the voices shaping expectations is Stephen Miran, one of Trump’s appointees to the Federal Open Market Committee (FOMC). Speaking Tuesday, Miran suggested that the Fed retains ample room to lower rates further, as he expects Trump’s tariff policies to be less inflationary than markets fear.
“My inflation outlook is more optimistic than that of some of my colleagues,” Miran said at a Managed Funds Association event. “That means the Fed’s dual mandate—price stability and full employment—faces fewer conflicts than many assume.”
Miran noted that inflation remains near 3%, above the Fed’s 2% target, while unemployment has risen to 4.3%, showing early signs of strain. His comments reinforced market expectations that another rate cut is not only possible—but increasingly likely—before year-end.
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