Fed Lowers Interest Rates Despite Data Uncertainties

The Federal Reserve is poised to lower its policy interest rate by a quarter of a point despite uncertainties in employment and growth data. According to a Reuters survey, economists nearly unanimously anticipate the target interest rate range to be adjusted to 3.75%–4.00%. This decision is perceived as a routine move due to the lack of economic data.

Data Glitch Leaves Fed in the Dark

Since October, the partial federal government shutdown in the U.S. has entered its 29th day, hindering the Fed’s access to critical employment statistics that guide its decisions. With the official employment report for September unavailable, Fed officials must base their choices on August data. In that period, the unemployment rate rose to 4.3%, with a decrease in foreign-born labor preventing a further rise. While Fed officials view the employment market as stable, significant layoffs from large corporations like Amazon and increased state unemployment claims necessitate a cautious approach.

Meanwhile, the Consumer Price Index (CPI) data released for September indicated a slowdown in housing prices, suggesting diminished inflationary pressures. This easing of inflation, coupled with labor market concerns, has strengthened expectations for an interest rate cut.

Data from the CME Group’s FedWatch tool implies a 99.9% probability that the Fed will lower rates by 25 basis points. Another 25 basis point cut is expected in December, with an 89% probability projected.

Markets Brace for Fed Decision and Powell’s Insights

The Fed interest rate decision will be announced at 21:00 today. Chair Jerome Powell is anticipated to provide insights into the economy and hints for the December meeting during a press conference half an hour after the decision is revealed. Fed officials highlight navigating the economy in “a fog” due to the absence of officially released inflation data.

Standard Chartered economist Steven Englander noted that some members might favor a 50 basis point cut, while others focus on inflation concerns and advocate for maintaining the rate. Oxford Economics Chief Economist Ryan Sweet asserted that the lack of data obscures decision processes, which could lead to another rate cut if the government shutdown persists into December.

As the Fed’s rate decision looms, leading cryptocurrencies like Bitcoin and Ethereum have experienced slight declines, with Bitcoin stabilizing around $113,000 and Ethereum slightly above the critical $4,000 support. Other major altcoins such as XRP, Solana , BNB, Dogecoin , TRON, and Cardano have also seen drops of 1% to 3%. Analysts suggest that the global and cryptocurrency markets have already priced in the Fed’s rate cut decision, making Powell’s upcoming remarks the focal point of interest.

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