It is almost certain that the Federal Reserve will cut interest rates by 25 basis points. Powell's forward guidance may enter a "silent moment."

The market has a widespread expectation for two things at this week's Federal Reserve policy meeting - policymakers will decide to cut interest rates by 25 basis points; Powell may not provide too much forward guidance, as the increasingly widening divergences among decision-makers make the future policy path unclear. Earlier this month, Powell stated that the Federal Open Market Committee (FOMC) will continue to focus on the threats facing the labor market. The U.S. September CPI data released last Friday showed inflation weaker than expected, which may temporarily restrain the hawks within the Fed. Krishna Guha, head of Global Policy and Central Bank Strategy at Evercore ISI, said, "Labor data continue to play a greater role in policy debates." He pointed out that as long as officials are satisfied with inflation expectations and price pressures from wages and the service sector are at manageable levels, Powell can continue to focus on employment issues and "push the Fed back to a neutral policy stance". The Fed will announce its rate decision early Thursday morning Beijing time. Powell will hold a press conference 30 minutes after the rate decision is announced. This meeting will not announce new economic forecasts or a dot plot. Federal funds futures show that investors are almost certain that the Fed will cut rates by 25 basis points at this meeting. However, the almost certain fact of a rate cut does not mean that decision-makers have reached a consensus on the interest rate outlook. While many members acknowledge risks facing the job market, they continue to express concerns about inflation. Although U.S. CPI in September fell below expectations, core CPI (considered a better indicator of inflation potential trends) rose 3% year-on-year, a full percentage point higher than the Fed's target. Economist Anna Wong said, "The FOMC is expected to cut rates by 25 basis points at the meeting on October 28-29, but it is uncertain whether the committee will announce the end of quantitative tightening (QT). We expect FOMC to announce the formal end of QT in November." Some Fed officials also pointed out that price increases in certain sectors of the economy, such as services, remain stubbornly high, despite these areas being less affected by tariffs. In addition, threats of new tariffs on China and Canada by the U.S. have added new uncertainty to price trends and economic prospects. Therefore, the internal divergences within the FOMC may be more severe than in September. At that time, 9 members supported cutting rates at most one more time this year. In this context, analysts expect Powell to avoid providing clear guidance on the policy path in future meetings. Due to the government shutdown leading to a lack of official economic data, he will be more cautious. Matthew Luzzetti, Chief U.S. Economist at Deutsche Bank, said, "Hopes that future data will help bridge the gap between the two sides." However, he added that as long as there is still a divergence, Powell will send very few signals for the meetings in December and beyond. Fed Director Stephen Miran has already stated that he will vote against the mainstream opinion again, supporting a 50 basis point rate cut. Among the remaining voting members, Kansas City Fed President Jeff Schmid may become a potential dissenter supporting keeping rates unchanged. Fed observers also believe that the likelihood of the FOMC pausing the reduction of Treasury holdings from its $6.6 trillion balance sheet at this meeting is increasing. Officials have been seeking to reduce the size of the asset portfolio as much as possible without draining too much liquidity for months. Powell stated earlier this month that the central bank may reach this balance point in the coming months, but in recent weeks, there have been signs of tension in the money markets. Guneet Dhingra, Head of U.S. Rates at BNP Paribas, said, "Currently, we are on a thin line between volatility and pressure. I believe, from a risk management perspective, this clearly indicates that they need to seriously consider ending the balance sheet reduction."