Will the Fed Definitely Cut Rates Tonight?

① Key question 1: How will the Fed assess the future interest rate path?
② Key question 2: How does the Fed view the current US economic situation amidst the data fog?
③ Key question 3: Will the Fed formally announce the end of quantitative tightening (QT)?

The Federal Reserve will announce its highly anticipated October interest rate decision at 2:00 AM Beijing Time on Thursday, and Chairman Jerome Powell will, as usual, hold a press conference half an hour later (2:30 AM). This is undoubtedly the most crucial event in this "super week," which encompasses policy decisions from four major central banks (US, EU, Japan, Canada) and earnings reports from numerous tech giants!

Regarding this, many industry insiders suggest that the easiest task for the Fed on Wednesday might be announcing another rate cut at the conclusion of its two-day policy meeting. However, the real challenge will lie in handling other details—precisely the details that are posing significant challenges for current policymaking. As this is not a quarter-end meeting, no new economic projections or dot plot will be released.

Currently, the market widely expects the Federal Open Market Committee (FOMC) to announce a 25-basis-point rate cut at tonight's meeting, the second consecutive meeting with a cut, which would lower the target range for the federal funds rate to 3.75%-4.00%—according to the CME FedWatch Tool, the probability of this cut is now as high as 99.9%.

However, the nearly certain expectation of a rate cut this month does not necessarily mean the Fed is in complete internal agreement regarding the monetary policy outlook. In fact, due to the lack of official government data caused by the US government shutdown, the Fed currently finds itself in an extremely awkward position. At this week's policy meeting, policymakers from hawkish and dovish camps are likely to engage in fierce debate over the direction of the future interest rate path, the challenges posed by the lack of economic data, and even whether to end QT early.