The Federal Reserve faces significant political and economic pressure as its critical interest rate decision, scheduled for announcement on October 29, draws near.
President Donald Trump has consistently advocated for interest rate cuts, and data from the prediction market Polymarket indicates that investors are overwhelmingly anticipating such a move.
Markets Predict Overwhelming Likelihood of Fed Rate Cut
According to data from Polymarket, the probability of the Federal Reserve implementing a 25 basis point interest rate cut is priced at 98%, excluding fractional percentages. The data further suggests that the probability of a 50 basis point or greater cut stands at approximately 1%, while the chance of no change in interest rates is also around 1%. The likelihood of a rate hike is estimated to be less than 1%.
The primary catalyst behind these strong market expectations for an interest rate cut has been the recent release of weaker-than-anticipated employment data. Specifically, lower-than-expected private sector employment figures suggest a notable slowdown in the labor market.
The Federal Reserve, which resumed its practice of cutting interest rates in September, is widely expected to follow a similar course of action at this upcoming meeting. Economists at Bank of America Securities have projected that, "In addition to cutting interest rates by 25 basis points at its October meeting, the Fed may announce an end to its balance sheet contraction."