What Powell Says Today Could Matter More Than What the Fed Actually Does with Rate Cuts

The Federal Reserve is expected to cut rates by a quarter point to a range of 3.75% to 4.00%, marking its second reduction this year as policymakers try to support growth without reigniting inflation. Markets will be watching Chair Jerome Powell’s remarks for clues on future cuts and the possible end of quantitative tightening.

The Federal Reserve meets on Wednesday, with Wall Street almost certain it will deliver a quarter-point rate cut, lowering the federal-funds target range to 3.75% to 4.00%. It would mark the second reduction of the year, following September’s move, as policymakers try to steady growth without reigniting inflation.

But the rate decision itself may not be the real story. Investors are more focused on what Chair Jerome Powell says next, especially his tone on growth, inflation, and the possible end of quantitative tightening. His comments could set the course for markets long after today’s cut is out of the way.

Fed Is Expected to Deliver Another Rate Cut

Most economists expect the Fed to trim rates again as a safeguard against economic softening. With the government shutdown halting official data releases, policymakers have relied on private surveys and state-level figures to gauge the economy’s pulse.

Job data has weakened slightly. The ADP report for September showed a 32,000-job decline, and the New York Fed’s survey found record-low confidence among workers in finding new jobs. Still, the broader picture remains sturdy. Nearly 90% of S&P 500 (SPX) companies have beaten earnings forecasts this quarter, and GDP revisions showed stronger growth than first reported.

Powell Tries to Steady the Economy without Reigniting Inflation

Chair Jerome Powell’s biggest challenge will be tone. If he leans too heavily on signs of weakness, investors could read that as recession risk. If he sounds too upbeat, markets may doubt the Fed’s willingness to ease further.

Analysts expect Powell to describe growth as “moderate” and inflation as “somewhat elevated,” keeping the door open to more cuts while maintaining caution. He is also likely to emphasize “risk management,” a phrase that signals the Fed will move carefully as new data arrives.

Goldman Sachs Sees Three Cuts Before a Pause

Goldman Sachs (GS) economist David Mericle expects the Fed to complete a trio of quarter-point cuts by December. “The FOMC has delivered risk management cuts in sets of three in the past and has preferred to complete the package even when the situation seemed less concerning by the third cut,” he wrote.

This historical pattern suggests the Fed may follow through with one more reduction this year before pausing to reassess.

Quantitative Tightening Could Soon Wind Down

Powell may also address the Fed’s ongoing quantitative tightening program, which reduces its balance sheet. He recently warned that continuing at the current pace could tighten liquidity in short-term funding markets.

Analysts at JPMorgan (JPM) and Macquarie (AU:MQG) believe the Fed could announce plans to slow or end QT before the end of the year. The move would not mark a return to bond buying, but it would signal an effort to stabilize financial conditions and ensure ample market liquidity.

What Investors Are Watching

Markets care less about today’s cut and more about what comes next. Powell’s remarks on future rate paths and QT will set the tone for the rest of the year. Futures traders already expect the policy rate to fall near 3% by late 2026, suggesting that investors see the tightening cycle nearing its end.

Stay ahead of macro events with our up-to-the-minute Economic Calendar — filter by impact, country, and more.