Expectations of a Federal Reserve interest rate cut continue to disturb financial markets.

Against the backdrop of the US government "shutdown," the latest speeches by Federal Reserve officials are drawing significant market attention. According to the schedule, Fed Chairman Powell will speak before US market hours next Thursday (October 9). Investors will then focus on how Powell comments on the impact of the government "shutdown."

Meanwhile, the Trump administration is using the government "shutdown" crisis to advance a second round of large-scale federal employee reduction plans. Wall Street analysts point out that this may further worsen risks in the US job market. In the absence of benchmark data, the Federal Reserve may face greater pressure to cut interest rates.

Currently, the market has almost fully priced in a Fed rate cut at the October policy meeting, with the probability of a December rate cut also priced at around 86%. According to CME "FedWatch," as of this writing, the probability of a 25-basis-point Fed rate cut in October has risen to 96.2%.

The Federal Reserve's Heavy Impact

The US government's "shutdown" farce will continue to disturb the US stock market. Mark Hackett, Chief Market Strategist at Nationwide, said: "The US government 'shutdown' and the potential reopening have become the focus of almost all investors."

Some investors worry that if the US data drought lasts for several weeks, the Fed will lose benchmarks helpful for guiding its decisions, potentially causing confusion about its interest rate path. Furthermore, the longer the data drought persists, the more economic growth might be dragged down.

Despite the US government "shutdown," Fed officials will intensively participate in events and deliver speeches, potentially releasing monetary policy signals. Of particular interest is Fed Chairman Powell's opening remarks at a community banking conference hosted by the Board of Governors before US market hours next Thursday (October 9).

Investors will then focus on how Powell comments on the recent government "shutdown."

The "data shutdown" caused by the government shutdown is making Fed policy-setting increasingly complex. Analysts warn that the longer the budget dispute drags on, the greater the risk of data disruption. The Bureau of Labor Statistics cannot release the September jobs report, and key CPI inflation data has also been delayed.

Meanwhile, several Fed officials will make public appearances and speak next week. Specifically (all in Beijing Time):

Tuesday (October 7): 2027 FOMC voting member, Atlanta Fed President Bostic, speaks on the economic outlook; New Fed Governor Milan participates in a fireside chat; Minneapolis Fed President Kashkari also speaks.

Thursday (October 9): The Fed releases minutes from its monetary policy meeting; Fed Governor Bowman and Minneapolis Fed President Kashkari will also deliver speeches successively.

Friday (October 10): Fed Governor Barr and 2026 FOMC voting member, Minneapolis Fed President Kashkari, speak at an event; 2025 FOMC voting member, Chicago Fed President Goolsbee, delivers opening remarks and moderates a discussion at a community bankers symposium.

Some analysis points out that against the backdrop of the US government "shutdown," any additional insights into Fed officials' stance on rate cuts could trigger market reactions.

The Fed's Mounting Pressure for Rate Cuts

It is worth noting that the Trump administration is currently using the government "shutdown" crisis to advance a second round of large-scale federal employee reduction plans. This strategy is seen as a renewed attempt after the failure of the Musk administration's Department of Government Efficiency (DOGE).

According to data from the US Office of Personnel Management, approximately 154,000 federal employees have accepted this plan, with two-thirds of these employees receiving pay and benefits until the end of the fiscal year on September 30. The plan allows federal employees to continue receiving pay and benefits for several months after separation.

Beyond this, the Trump administration has also implemented hiring freezes, forced layoffs, and other voluntary separation programs. Overall, the Trump administration expects the total number of federal employees to be reduced by hundreds of thousands by the end of this year.

With the nonfarm payroll report absent, the employment data for the private sector released by ADP Research is the most watched indicator by the market.

US September ADP data showed a loss of 32,000 private sector jobs, already indicating labor market weakness.

Wall Street analysts say that with the loss of 32,000 private sector jobs in September, combined with large-scale departures of government employees, the US job market faces further deterioration risks. In the absence of benchmark data, the Federal Reserve faces greater pressure to cut interest rates.

Ryan Sweet, Chief US Economist at Oxford Economics, said that federal government layoffs are one of the main reasons for the weakness in the US job market in recent months.

Heather Long, Chief Economist at Navy Federal Credit Union, said in a report to clients: "The job market has been frozen for nearly a year, and the situation for job seekers now appears to be worsening further. In the current economic climate, Americans feel stuck."

Meanwhile, data from the Institute for Supply Management (ISM) shows that manufacturing employment has contracted every month since the beginning of 2023, except for three months. Data released on Friday showed that service provider employment contracted for the fourth consecutive month in September.

According to CME "FedWatch," as of the latest, the probability of the Fed keeping rates unchanged in October is 3.8%, while the probability of a 25-basis-point cut is 96.2%; the probability of the Fed keeping rates unchanged in December is 0.4%, the probability of a cumulative 25-basis-point cut is 13.3%, and the probability of a cumulative 50-basis-point cut is 86.3%.