Fed seen cutting rates 25 bps as markets brace for volatile week

The Federal Reserve’s policy decision on October 29, expected to include a 25 basis point cut to the federal funds rate, will be the focal point for markets next week as traders brace for heightened volatility across equities, fixed income, currencies and cryptocurrencies. The two-day Federal Open Market Committee meeting concludes with the rate announcement and a press conference by Chair Jerome Powell roughly 30 minutes later, when investors will seek guidance on the Fed’s path for 2025.

Money markets and pricing tools show a strong probability of a cut. According to the CME FedWatch Tool, the odds of a 25 basis point reduction are near 97 percent. That expectation has been reinforced by recent data and Federal Reserve commentary suggesting the central bank is approaching the end of its balance sheet runoff. With many official reports delayed by an ongoing U.S. government shutdown, remaining releases this week take on added importance in shaping the Fed’s messaging.

Key economic data scheduled around the meeting include third-quarter annualized GDP on Thursday and the core Personal Consumption Expenditures price index on Friday, the Fed’s preferred inflation gauge. Earlier...