Data Expectation – “FED Interest Rate Decision” DATE: 29-10-2025
✅ What to expect
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The Fed’s policy‐setting body, the Federal Open Market Committee (FOMC), is meeting over 28–29 October 2025.
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Markets expect a 0.25 percentage point (25 basis point) cut to the target federal funds rate, bringing it to 3.75%–4.00% from the current range.
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The economic backdrop is mixed: inflation is easing somewhat, but the labour market shows signs of cooling; at the same time, a U.S. government shutdown is limiting data availability.
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The Fed is also thought to be nearing the end of its “quantitative tightening” (QT) programme which has been reducing its balance sheet.
🧐 Why this matters
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A rate cut lowers borrowing costs: for consumers, businesses, and governments. This generally supports spending and investment.
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But cutting while inflation remains above the Fed’s longer-run target (~2%) introduces risk of inflation rebound.
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The signalling is key: even if the rate is cut, what the Fed says about future policy, the economy and inflation will drive markets (stocks, bonds, dollar, emerging markets).
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For international economies (such as India) and emerging markets, U.S. interest-rate decisions influence capital flows, exchange rates, and global risk sentiment.
🔍 Key uncertainties & what to watch
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Data blackout: The government shutdown in the U.S. means many key indicators (jobs, inflation, etc) are delayed or missing. Makes decision-making harder for the Fed.
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Labour market: Signs of cooling (rising unemployment claims) are noted, which may push the Fed toward easing.
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Inflation: Although inflation has cooled a bit (CPI ~3% recently) it remains above target; the Fed needs to balance supporting growth and containing inflation.
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QT and liquidity: Recent stress in money markets and banks raising backup funding have caused the Fed to rethink QT.
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Forward guidance: Markets will listen for clues on how many more cuts might follow, or if the Fed will pause.
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