Term coming to an end with missing data and uncertain prospects for the Federal Reserve policy under political pressure. Powell stated that the soft labor market is the main reason for this round of interest rate cuts.

The Federal Reserve announced another 25 basis points rate cut on Wednesday, marking the second consecutive rate cut after the 25 basis points cut in the September meeting. However, amidst the ongoing government shutdown in the United States, which has limited the supply of key economic data and with Chairman Powell's term coming to an end with no successor chosen, the future policy path is becoming increasingly unpredictable. The Federal Open Market Committee (FOMC) stated that the decision was aimed at maintaining stable prices while guarding against further weakness in the labor market. In addition to the rate cut, policymakers also announced that they will stop reducing the size of the Federal Reserve's balance sheet from December 1. Powell explained in a press conference that despite inflation remaining slightly high and consumer confidence decreasing, recent signs indicate that the job market is cooling down, which was an important driver for the decision to further ease policy. He emphasized that the labor market "appears to be modestly cooling", while inflation remains "relatively high." The October meeting coincided with continued pressure from the White House on Powell for more aggressive rate cuts. The latest round of public criticism came from President Trump during his visit to Asia. Trump accused Powell of "being always too slow to act" and openly suggested that Powell would leave office after his term ends in May next year, saying "he will be gone in a few months." The uncertainty about the future policy path is rapidly increasing. Powell stated after the meeting that there is a "significant disagreement" within the committee regarding whether to continue cutting rates in December, and emphasized that further rate cuts are "by no means set in stone," and that monetary policy will not automatically proceed on a predetermined path. Media discussions with Fed reporters pointed out that this rate cut is the second one this year, and before July this year, the mainstream view within the Fed still believed that the job market was strong and that the main risks were inflationary. However, since entering the third quarter, business hiring has markedly slowed down, while inflation data, although slightly above target, shows signs of gradual decline. This provided a policy window for the Fed to continue cutting rates, signaling a subtle shift in policy focus from "anti-inflation" to "employment stability." Another important background influencing the decision-making is the ongoing government shutdown. While the Fed does not depend on congressional appropriations, its policy judgments rely heavily on data provided by government agencies such as the Bureau of Labor Statistics and the Bureau of Economic Analysis, whose staff have been furloughed, leading to delays or even missing key economic indicators. Reporter Amara Omeokwe pointed out that in the absence of official data, the Fed will have to rely more on alternative indicators released by the private sector, such as consumer confidence, industrial activity, and various employment-related indicators. However, these indicators have less coverage and consistency than official statistics, posing risks of "limited visibility" in policy-making. Under the government shutdown, the Fed has access to almost only the latest September CPI data. The data was allowed to be released earlier, but it was delayed compared to the original plan. Excluding food and energy, core CPI increased by 0.2% month-on-month, lower than market and economist expectations, supporting some officials' assessment that inflation is moving in the right direction. However, Fed officials remain cautious about this reading. Analysts pointed out that a significant drop in rent may have a one-time component, and some imported goods still reflect tariff pass-through effects, with categories such as furniture and clothing still showing price pressures. Overall, U.S. inflation is still around 3%, significantly higher than the Fed's 2% target, meaning that "inflation is slowing down but still not meeting the target" will continue to be a core premise of policy path debates. Looking ahead to the December meeting, if the job market continues to significantly weaken while inflation remains stable, the Fed may face greater pressure to continue cutting rates, while on the other hand, if the labor market stabilizes and inflation remains high, the camp pausing rate cuts may gain ground again. Influenced by the government shutdown, if CPI and labor data cannot be released as scheduled in the coming weeks, policy discussions will face an environment of "making decisions in a data void," with complexity and risks significantly increasing. In addition to the policy disagreements themselves, the fact that Powell's term is coming to an end has become an important variable affecting the power structure of policy. According to current arrangements, Powell's term will end in May 2026, and after this month's meeting, there are only four more FOMC meetings to be held during his tenure. The Trump administration has clearly stated that it plans to identify a successor before Powell's term ends, meaning that market attention may shift to the "next Fed Chair's" policy preferences in the coming months. If the new Fed Chair is announced early, their public statements and policy preferences may intervene in market expectations while Powell is still in office, creating a "shadow chair effect" that weakens the current chair's leadership. The selection process, led by Treasury Secretary Bernst, has entered a concrete stage. The list shows that five core candidates are under consideration: current members of the Fed's board of governors Christopher Waller and Michelle Bowman, former Fed governor Kevin Warsh, White House National Economic Council Director Kevin Hassett, and BlackRock executive Rick Rieder. This combination covers current Fed officials, former officials, core members of the executive branch, and representatives of the market-oriented faction, seen as a "mixed list" that balances political and market signal management. From the structure of the list, some candidates are highly consistent with Trump's positions, such as Hassett, who is one of Trump's core economic advisors as the chair of the White House National Economic Council; Warsh has previously almost synchronized with Trump in criticizing the Fed and is an advocate for clearly low-interest rates. If appointed, the market generally expects a reinforcement of the monetary easing bias. Bowman comes from the banking system, has long been consistent with the Trump camp on regulatory issues, and expressed support for rate cuts earlier this year, seen as an intermediate candidate who is partially aligned in policy direction but maintains an independent technical stance. In contrast, Warsh is seen as the most "independent central bank-like" candidate on the list. Although nominated by Trump to join the Fed, his recent support for rate cuts is seen as stemming from his independent analysis of labor market data rather than political motives. During his tenure as a governor, he pushed for regional Fed cost reductions and staff restructuring, showing that he is not merely maintaining the status quo but has the ability and preference to implement reforms. If Warsh is ultimately selected, the market is widely expected to see him as a reassuring signal of the Fed's independence and professionalism, calming market expectations fluctuated by the "shadow chair." The uncertainty of the policy path is compounded by a more institutional risk factor the judicial boundaries of the Fed's independence are being re-tested. The Trump administration previously attempted to remove Fed Governor Randal Quarles from office prematurely on charges involving mortgage fraud before the case was fully litigated. The case is currently being heard by the Supreme Court. The Supreme Court previously rejected an emergency motion to allow the president to remove Quarles before the case was concluded, but has agreed to hold a formal hearing in January next year. It is widely believed that this ruling will be a key decision point in determining whether the red line of the Fed's independence is contracting. For a long time, the difficulty of dismissing Fed officials has been seen as a core institutional barrier to prevent political interference in monetary policy. If the Supreme Court ultimately rules that the president can dismiss Fed governors before the case is concluded, this barrier will be weakened, meaning that executive power can directly intervene in the monetary policy level, and the Fed's independence may be structurally reshaped. Market participants warn that once this precedent is confirmed, it will open an institutional window for future government policy pressures, and may even have medium-to-long-term impacts on the global trust foundation of U.S. dollar assets. Analysts point out that this rate cut by the Fed is not simply a continuation of the September decision, but a risk-hedging adjustment made under the constraints of multiple factors such as increasing signals of job cooling down, inflation still not meeting the target, weakened sources of policy data, political pressure, and imminent power transitions. There is already a clear disagreement within the committee over the future path, with some officials advocating for continued early rate cuts to prevent a "hard landing" for employment, while others emphasize not losing credibility in policy tightening until inflation returns to the target range. With the government shutdown causing the data gap to widen, the December meeting may make decisions in an "information-insufficient" environment, significantly increasing the costs of misjudgment.