The Fed's 25 basis point rate cut is likely to be a foregone conclusion, and Powell's forward guidance may be entering 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 because increasing divergences among decision-makers have made 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 US CPI data for September released last Friday showed that inflation was weaker than expected, which may temporarily suppress the hawks within the Federal Reserve. Global Policy and Central Bank Strategy Director at Evercore ISI, Krishna Guha, said, "Labor data continues to play a bigger 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 manageable, Powell can continue to focus on employment issues and "push the Federal Reserve back to a neutral policy position." The Federal Reserve 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 dot plots. Federal funds futures show that investors are almost certain the Federal Reserve will cut rates by 25 basis points at this meeting. However, the fact that rate cuts are almost a foregone conclusion does not mean that decision-makers have reached consensus on rate prospects. While many members acknowledge risks to the labor market, concerns about inflation persist. Despite US CPI in September being lower than expected across the board, core CPI (an indicator seen as a better measure of inflation trends) rose 3% year-on-year, a full percentage point higher than the Federal Reserve'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 the FOMC to announce the formal end of QT in November." Some Federal Reserve officials also pointed out that price increases in certain sectors of the economy (such as the service industry) stubbornly remain high, despite these areas being less affected by tariffs. In addition, the recent threat of new tariffs on China and Canada by the United States has added new uncertainties to price trends and economic outlook. Therefore, internal divisions within the FOMC may be more serious than in September. At that time, nine members supported cutting rates at most one more time this year. In this context, analysts expect Powell to avoid making clear signals about the policy path of future meetings. He will be more cautious due to the lack of official economic data caused by the government shutdown. Chief US economist at Deutsche Bank, Matthew Luzzetti, said, "I hope that future data releases will help bridge the gap between the two camps." However, he added that as long as the division remains, Powell will send out very few signals about meetings after December. Federal Reserve board member Stephen Miran has already stated he will vote against the mainstream opinion once again, in support of a 50 basis point rate cut. Among the other voting members, Kansas City Fed President Schmid may be a potential dissenter supporting keeping rates unchanged. Federal Reserve observers also believe that the possibility of the FOMC pausing the reduction of Treasury holdings from its $6.6 trillion balance sheet is increasing at this meeting. Officials have been seeking to reduce the size of the asset portfolio as much as possible without draining too much liquidity for months. Earlier this month, Powell said that the central bank may reach this balance point in the coming months, but in recent weeks, signs of tension have appeared in money markets. Head of US interest rates at BNP Paribas, Guneet Dhingra, said, "We are currently walking a fine line between volatility and pressure. I think, from a risk management perspective, it is very clear that they need to seriously consider ending the reduction of the balance sheet."