Will US Fed cut rates? Meeting in focus as government shutdown continues. Here's what to expect

The United States Federal Reserve (US Fed) began its two-day policy meeting to today, on October 28, with all eyes set on its interest rate decision, which will be announced after the Federal Open Market Committee's policy meeting ends on Wednesday, October 29, 2025.

The FOMC meeting began at 9 am local time (6.30 pm IST) in Washington, and will be announced at 2 pm local time (11.30 pm IST) on October 29, after two days of debate.

Policymakers are likely to approve a quarter-point rate cut, despite a lack of available data due to the ongoing US government shutdown, according to an AFP report.

US Fed to announce rate cut?

The report noted that the US Fed is “overwhelmingly expected” to announce a second consecutive rate cut to “support the cooling labour market”. This will bring down the Fed's benchmark lending rate to between 3.75 percent and 4.00 percent.

The Fed has a dual mandate from Congress to act independently to tackle both inflation and unemployment and has in recent months indicated it is increasingly concerned about jobs.

This is despite inflation remaining stubbornly above the bank's long-term target of two percent due — at least in part — to tariff-related inflation.

FOMC meeting: What do analysts think?

Speaking to AFP, Sarah House, a senior economist at Wells Fargo said, “I do think that there's some genuine concerns about the jobs market right now. So with policy still restrictive, I think it makes sense to be easing a little bit, but I think the bigger question is what comes down the road.”

The decision will be made without the usual array of official data that policymakers rely on when setting interest rates, complicating the Fed's role.

Bank officials have broadly said they expect US President Donald Trump's sweeping tariffs to have only a one-time effect on prices.

But some analysts have warned that the temporary price hikes could then reignite inflation.

That could force the Fed into the unenviable position of having undesirable conditions in both its mandate areas, with action on one potentially damaging the other.

Why would the Fed consider cutting rates without data?

According to an AP report, the Fed will “almost certainly” cut its key interest rates to boost jobs and “benefit customers and bring down borrowing costs for mortgages and auto loans”. It added that that another rate cut is also expected after the December FOMC meeting.

Notably, Fed chair Jerome Powell in August stated that the central bank would announce rate cuts this year.

Kris Dawsey, head of economic research at investment bank D.E. Shaw told AP that the Fed will likely “stay the path” laid out in September amid the lack of data during the shutdown, when it forecast cuts this month and in December.

“Imagine you’re driving in a winter storm and suddenly lose visibility in whiteout conditions. While you slow the car down, you’re going to continue going in the direction you were going versus making an abrupt change once you lose that visibility,” Dawsey explained.

(With inputs from AFP and AP)