#OctoberRateCutForecast

US Federal Reserve's October 2025 Rate Cut Expected: Fine-Tuning the Shift from Fighting Inflation to Growth
October 2025 was a month when global financial circles once again focused on Washington. As the US Federal Reserve prepares for its second interest rate cut of the year, the economic dynamics behind this move and the market reactions are quite striking.
Fed's Rate Cut: What to Expect?
At the Federal Open Market Committee (FOMC) meeting on October 29, 2025, the Fed is expected to cut its policy rate by 25 basis points from 4.25% to 4.00%. This will be the second easing step, following the first cut in September.
Inflation, Employment, and Growth Balance
The key factors influencing the Fed's decision are as follows:
Slowing inflation: The slowdown in the consumer price index's growth rate to 2.8% in August and September gave the Fed room to adopt a more relaxed stance.
- Cooling in the labor market: The unemployment rate rose to 4.1%, while new job postings decreased. This was interpreted as a signal of weakening demand.
- Global economic uncertainties: The slowdown in growth in China and the recession in Europe are impacting US export and investment prospects.
Messages from Fed Officials
The Fed Chair's latest statement highlighted the following:
"As we approach our inflation target, we are prepared to take appropriate steps to support economic growth. However, we will remain cautious."
This statement suggests that the Fed will pursue a gradual, data-driven strategy rather than a sudden and aggressive easing.
Market Reactions and Forecasts
- Bond Market: 10-year US Treasury yields fell to 3.85%, indicating that investors are preparing for a lower interest rate environment.
- Stocks: The S&P 500 index rose 2.3% in early October due to interest rate cut expectations.
- Dollar Index (DXY): The dollar depreciated slightly against other currencies in anticipation of the interest rate cut.
Impact on Banking and Consumers
The interest rate cut, while not directly affecting the financing conditions of consumers and businesses, is expected:
- Mortgage Loans: Limited decreases are expected for fixed-rate mortgages.
- Credit card interest rates: Small fluctuations are expected for variable-rate products.
- Commercial Loans: Easing borrowing costs for SMEs may increase investment appetite.
Year-End and 2026 Outlook
Market analysts predict that the Fed may implement another interest rate cut in December. However, this will depend on inflation remaining in line with the 2% target and the labor market not loosening further.
Expectations for 2026:
- Interest rates falling to 3.5%
- Stronger growth and investment environment
- Global capital flows shifting to the US