The Federal Reserve delivers its October policy decision on Wednesday, with the statement due at 19:00 UK and Chair Powell’s press conference at 19:30 UK.
Markets are finely balanced between relief at gradually cooling inflation and concern over a softening labor backdrop, leaving the policy path beyond October highly sensitive to the Fed’s tone.
In this preview, we set out Our Call for the rate decision and Our View on the press conference, highlighting the key phrases to watch, how they could shift expectations for December, and the likely cross-asset reactions.
For traders, the absence of a new dot plot places even more weight on the wording of the statement and Powell’s Q&A, where nuance on growth risks, inflation progress, and any hints around QT will matter as much as the headline move.
Our Call — Rate Decision
We expect a 25bp cut to a 3.75% – 4.00% target range, with the Implementation Note lowering IORB/ON RRP by 25bp. The statement should lean dovish on labor-market risks while keeping inflation progress “uneven but improving.” With no SEP/dot plot this meeting, guidance will be conveyed by tone, December remains live, not pre-committed.
How this differs from consensus: Street largely expects a quarter-point cut; we think Powell will keep optionality for December but avoid pre-signaling it, a touch more hawkish than markets leaning for a firm December hint.
Why
-
Disinflation at the margin: Recent CPI/PCE prints show incremental cooling in core, reducing the need to hold at restrictive settings.
-
Softening labor backdrop: Private indicators and Fed commentary point to rising downside risks to employment.
-
Growth decelerating but resilient: Activity is still positive, yet the mix justifies risk-management easing.
-
Financial conditions: Not tight enough to prevent a measured cut; room to ease without destabilizing funding.
Our View — Press Conference
Powell to emphasize:
-
“Data dependence” with balanced risks but greater sensitivity to employment.
-
December cut kept on the table, contingent on inflation/labor data between now and then.
-
QT: No decision, but openness to tapering/ending runoff if money-market frictions build—a marginally dovish tail risk.
-
Tariffs/supply: Characterized as modest, largely one-off pass-throughs; not a reason to pause easing today.
Market Set-Up & Reaction Map
Baseline (cut + dovish lean, December optional):
-
USTs: Mild bull-steepening; front-end leads lower.
-
USD: Softer. EURUSD can probe last month’s highs (1.1700). USDJPY dips toward 151.2–151.5. GBPUSD supported toward mid-1.33s.
Dovish surprise (explicit December bias and/or QT hint):
-
USTs: Front-end rally accelerates.
-
USD: Broader downside; EURUSD extends beyond 1.1700, USDJPY toward 151 handle.
Hawkish cut or hold (no December cue, firmer inflation language):
-
USTs: Bear-flattening; 2-yr reprices higher.
-
USD: Bounces; EURUSD fades toward 1.1600, USDJPY re-tests 153.00 – 153.30; GBPUSD slips to low-1.33s / high-1.32s.
Phrases to scan at 19:00/19:30
-
More dovish: “downside risks to employment,” “further progress on inflation,” openness to QT taper/endpoint.
-
More hawkish: “inflation progress is uncertain,” “policy remains restrictive and appropriate,” no QT discussion.
Trading Notes (concise)
-
Rates: Fade front-end sell-offs into a 25bp cut base case; add duration on any QT hint.
-
FX: Sell USD on dovish tone/December optionality; watch EURUSD 1.1700, USDJPY 151.00 – 153.00 range, GBPUSD 1.3300.
-
Risk management: With no dots, Powell’s tone is the catalyst—position sizing should reflect headline-risk around the Q&A.
Our Call remains a 25bp cut to 3.75% – 4.00%, with Powell using the press conference to keep December optionality while stressing data dependence and labor-market risks.
The headline move matters less than the tone, any hint of QT taper/end or a clearer December bias tilts dovish; firm emphasis on “uncertain” inflation progress tilts hawkish. Into 19:00/19:30 UK, we favor long front-end duration and a modestly weaker USD on the base case, adjusting quickly if the language surprises.
Stay nimble: with no dot plot, a few lines in the statement and Q&A will set the path for rates, the dollar, and risk into year-end.
This article is for informational purposes only and does not constitute investment advice.
For similar Forex Markets news please visit our Markets News page.
Please visit our Disclaimer page.
Disclaimer
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these or any financial instrument or instruments.
TerraBullMarkets.com does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets or any financial instrument involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress.
All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TerraBullMarkets.com nor any of its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
TerraBullMarkets.com and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. TerraBullMarkets.com and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and TerraBullMarkets.com are not registered investment advisors and nothing in this article is intended to be investment advice.
