Fed Expected to Cut Rates Again; BOJ and ECB Likely to Hold Steady

This week, global markets are set for another "super central bank week," with major central banks including the Federal Reserve, European Central Bank, Bank of Japan, and Bank of Canada all announcing their latest interest rate decisions. Markets expect the Fed and the Bank of Canada to cut rates by 25 basis points, while the European Central Bank and the Bank of Japan are anticipated to hold steady.

The Federal Reserve will announce its interest rate decision on the 29th local time. It is widely expected to cut rates by 25 basis points, lowering the federal funds rate to the 3.75%-4.00% range, especially following recent US inflation data that came in below expectations.

For the first eight months of the year, Fed policymakers had kept rates unchanged, awaiting to assess the economic impact of tariffs and other policy adjustments. After a significant slowdown in hiring this summer, officials decided to cut the benchmark interest rate by 25 basis points in September. In the dot plot released that month, they projected two more rate cuts before the end of the year.

Currently, although markets remain concerned that tariffs could increase inflationary pressures, recent signs of weakness in the US labor market have led markets to fully price in expectations for a Fed rate cut. Meanwhile, as the US federal government shutdown has delayed the release of several economic data points, market attention will turn to the October Consumer Confidence Index due on Tuesday. Additionally, investors will closely scrutinize the Fed's wording in the post-meeting statement for signals regarding the extent and pace of future rate cuts.

Cui Xiao, US Senior Economist at Pictet Wealth Management, told a First Financial reporter that the US economy is facing a paradox: the labor market is showing signs of weakness, yet GDP growth remains resilient. Several intertwined factors this year collectively explain this disconnect, including tariff policies, the "One Big Beautiful Bill," wealth accumulation inequality, restrictive immigration policies, and the AI boom. She said the concept of a "K-shaped economy" is quite enlightening, referring to the significant divergence in economic performance among different demographic groups and industries.