29.10.25 - Fed - rate cut without data

The Federal Reserve (Fed) is widely expected to announce a 25bps rate cut today — despite operating half blind. With the labour market data missing due to the ongoing US government shutdown, policymakers are making a decision without one of their key reference points.
Recent inflation readings, at around 3%, remain clearly above the Fed’s 2% target, offering little justification for a cut from a purely data-driven perspective.

Markets: US markets higher fueled by hope on rate cut and trade deal

• US Futures trading positive with Nasdaq +0.5% (after strong rally during last days)

• US yields tending sideways with the 10-year yield around 4.0%

• US dollar: stronger today

• Gold: regains ground and back above the USD 4’000/oz level

• Cryptos: trading sideways

My View: I see a weak case for cutting rates at this stage. Latest GDP data indicates a 3.9% growth. Inflation is still well above target. The labor market has some signs of slowing but not deteriorating. With unemployment at 4.3% indicates a labour market close to what the Fed calls “maximum employment”.
The Fed is clearly under political and market pressure to deliver, but that doesn’t mean it should.
If the Fed decides not to cut, markets would likely react sharply. Yet, by cutting now, it risks fueling the existing market bubble, as equity leverage stands at new record highs. There’s no real urgency to lower rates — and doing so without full data could come at a high price later.

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