The Fed could cut interest rates for the second time this year at its upcoming meeting.

The US Federal Reserve (Fed) is expected to announce a second interest rate cut this year at its meeting on October 29, although the US economic outlook remains unclear due to the government shutdown.

The headquarters of the US Federal Reserve (FED) in Washington, DC. Photo: THX/VNA

The Fed's October meeting took place against the backdrop of a weeks-long standoff between Republicans and Democrats over healthcare subsidies, which resulted in most official economic data being withheld.

According to US Congressional regulations, the Fed has the dual mandate of controlling inflation and ensuring employment through adjusting the benchmark interest rate. Without these key indicators, Fed officials are forced to make interest rate decisions without the usual full data. Analysts and investors predict the Fed will lower interest rates by another 0.25 percentage points, bringing the key lending rate to 3.75-4.00%, and may not reveal much about the final rate cut of the year, expected in December 2025.

The lack of official information has complicated the debate within the Fed regarding whether to accelerate rate cuts to support a weakening labor market, or maintain a tight monetary policy stance while inflation remains above the 2% target in the long term. Consumer prices have been pushed up in part by the high trade tariffs imposed by the Trump administration on major trading partners.

In an interview on October 26, Finance Minister Scott Bessent expressed confidence that inflation would cool down in the coming months.

The only significant economic data released since the government shutdown on October 1st was the consumer price index (CPI), which rose 3% in the 12 months to September 2025 — slightly lower than forecasts. This information fueled a surge in financial markets, with stock indices reaching new record highs.

Although the Fed uses a different measure to track inflation, data prior to the government shutdown also showed that the index remained significantly higher than the 2% target. Conversely, the job market is slowing down noticeably, with only 22,000 new jobs created in August 2025, even though the unemployment rate remains at a record low of 4.3%.

KPMG's chief economist, Diane Swonk, predicts the Fed will continue to cut rates two more times this year and may end its quantitative tightening program next week, in response to rising liquidity risks.

Source: https://baotintuc.vn/kinh-te/fed-co-the-cat-giam-lai-suat-lan-thu-hai-trong-nam-tai-cuoc-hop-sap-toi-20251027104244050.htm