All eyes are on the Federal Reserve’s policy meeting on October 28–29, 2025, as investors anticipate another rate cut. Here’s what markets expect, how inflation trends shape the Fed’s next move, and what it means for stocks, bonds, and currencies.
Global investors are preparing for one of the most closely watched Federal Reserve meetings of the year, scheduled for October 28–29, 2025. After months of mixed economic data and easing inflation, the market is now pricing in another interest rate cut of 25 basis points, extending the Fed’s pivot from tightening to easing that began in mid-2025.
According to LSEG FedWatch data, traders assign a nearly 85% probability of a quarter-point rate reduction, which would bring the federal funds rate closer to 4.50%. This comes amid growing expectations that the central bank will maintain a “soft-landing” strategy — aiming to support growth without reigniting inflationary pressures.
Recent U.S. economic data has supported the case for rate cuts. The Consumer Price Index (CPI) rose only 0.3% in September, slightly below market forecasts. Year-over-year inflation now stands at 2.8%, marking a significant drop from the 6–7% range seen during the inflation peak of 2022–2023.
“Inflation has cooled faster than expected, but the Fed wants to ensure this trend is durable before committing to deeper cuts,” said Callie Cox, chief market strategist at Ritholtz Wealth Management. She added that the Fed’s message is likely to emphasize data dependency — that future moves will hinge on sustained moderation in prices and steady job growth.
Still, the core PCE index, the Fed’s preferred inflation gauge, remains slightly above target at 2.5%. Some policymakers have voiced concern that easing too quickly could fuel asset bubbles, especially in the housing and tech sectors.
The labor market continues to show signs of controlled cooling rather than a collapse. Unemployment has inched up to 4.2%, yet job creation remains resilient in healthcare, technology, and energy. Meanwhile, GDP growth for Q3 came in at 2.1%, suggesting that the U.S. economy is slowing but not stalling.
According to Bloomberg Economics, this “slow-but-steady” trajectory gives the Fed room to continue its measured rate-cut path, avoiding the risk of triggering inflation through aggressive easing.
Wall Street has responded positively to the growing prospect of lower rates.
The S&P 500 and Nasdaq Composite both hit record highs last week, with gains of 0.8% and 1.1%, respectively.
The Dow Jones Industrial Average also recorded its strongest weekly jump since June.
Lower borrowing costs are seen as a tailwind for growth stocks, particularly in the AI, semiconductor, and consumer discretionary sectors. “Investors are betting that the Fed’s pivot will extend the current bull market,” said Natasha Kaneva, head of global commodities strategy at JPMorgan.
However, bond markets remain cautious. The 10-year Treasury yield briefly dipped below 4.0% before rebounding, reflecting uncertainty about how many more cuts the Fed will deliver in 2025. Analysts expect at least two additional rate reductions before year-end.
The U.S. dollar index (DXY) has remained nearly flat around 98.9, as investors await clarity from the Fed. A dovish signal — confirming a rate cut — could push the greenback lower against major peers like the euro and yen.
Meanwhile, commodities have mirrored the Fed-driven sentiment shift:
Gold has held above $4,100 per ounce, gaining support from lower yields and safe-haven demand.
Oil prices stabilized near $61.50/barrel, after a volatile week driven by renewed geopolitical risks and sanctions on Russian producers.
Currency strategists say a sustained weakening of the dollar could bolster emerging-market assets in Asia and Latin America, which often benefit when U.S. rates decline.
The Fed’s policy stance carries implications far beyond U.S. borders.
In Europe, the ECB has hinted at maintaining higher rates for longer to tame persistent inflation above 3%.
In Asia, central banks such as those in Japan and South Korea are closely monitoring capital flows as U.S. yields move lower.
A synchronized global easing cycle could emerge by early 2026 if inflation continues to subside, economists say — potentially setting the stage for a new growth phase in global equities and commodities.
The post-meeting press conference with Chair Jerome Powell will be critical in shaping sentiment. Markets will look for:
Hints about the trajectory of future cuts
Updates on the Fed’s economic projections (SEP)
Clarifications on how the Fed views the risks of stagflation or recession
If Powell strikes a balanced tone — acknowledging progress on inflation while emphasizing caution — markets may stabilize around current highs. But a more aggressive dovish signal could unleash another wave of risk-on trading.
Despite global uncertainty, consensus forecasts remain optimistic.
Goldman Sachs expects the S&P 500 to rise another 8–10% by year-end, driven by lower yields and earnings resilience.
Meanwhile, JPMorgan projects the U.S. economy to expand 1.8% in 2026, even with ongoing policy normalization.
“The Fed’s playbook is clear — cut, but carefully,” noted economist Gregory Shearer. “Markets are transitioning from fear of inflation to hope for stability.”
The upcoming Federal Reserve meeting on October 28–29 could mark another pivotal moment in the post-inflation recovery story.
While the market consensus favors a 25-bps rate cut, the tone and guidance from Chair Powell will determine whether investors interpret it as the beginning of a prolonged easing cycle or merely a mid-course adjustment.
Either way, the Fed’s balancing act between growth and inflation remains the central narrative driving global markets into late 2025.
1. When is the next Federal Reserve meeting?
The next FOMC meeting is scheduled for October 28–29, 2025, with the policy statement expected on the second day.
2. What rate change is expected from the Fed?
Markets are pricing in a 25-basis-point rate cut, which would lower the federal funds rate to around 4.50%.
3. How will a Fed rate cut affect the stock market?
Lower rates typically support equity prices by reducing borrowing costs and boosting investor risk appetite — especially for growth and tech stocks.
4. What should investors watch after the meeting?
Focus on Chair Powell’s tone during the press conference, updated inflation forecasts, and the Fed’s guidance for 2026.
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