Fed rate-cut rumors are gaining traction ahead of the October meeting. Markets now see a 25 basis point cut as nearly 99–100% probable. The Fed’s next policy meeting is scheduled for Oct. 28–29, and economists expect a reduction from 4.00–4.25% to about 3.75–4.00%.
This shift is driven by signs of a cooling U.S. labor market and softening economic data. A weaker dollar is also expected as cutting rates tends to diminish yield differentials.
What it means for markets:
Equities may rally further if cuts are confirmed — lower rates often make borrowing cheaper and boost risk assets.
Bonds & yields could see a drop in yields (i.e. prices rise) as demand increases for fixed income.
Currency markets may favor non-USD currencies, especially if other central banks are less aggressive.
Volatility risk remains — markets may overreact, and inflation concerns could complicate the Fed’s path.