Markets expect another Fed rate cut at end of October

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Yaroslav Dmytrenko

08.10.2025

Markets expect another Fed rate cut at end of October — FOMC members divided over future rate cuts in 2025

The release of the minutes from the September meeting of the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve contained no surprises. Markets remain focused on the next expected interest rate cut at the end of October.

The minutes are traditionally published three weeks after the meeting, and this time they revealed that the quarter-point rate cut in September — the first one of 2025 — was largely driven by political considerations.

Although the Fed justified the move by citing increased risks to the labor market, the transcript shows that most officials remain concerned about inflation, noting continued uncertainty about the impact of tariffs and the risk that elevated inflation could persist longer than expected. Some officials even considered maintaining rates for a longer period an achievement, given what they see as stalled progress in reducing inflation.They also voiced concerns that long-term inflation expectations could rise if inflation fails to return to the Fed’s 2% target within the desired timeframe.

Against this backdrop, the newest member of the Board of Governors — Trump’s former chief economic adviser, Stephen Miran — took a different stance, advocating for an even larger rate cut of half a percentage point.

On the labor market, policymakers stated that they did not observe any “sharp deterioration in labor conditions.” They noted that slower job growth likely reflects declines in both labor supply and demand.

Two more reductions?

Nevertheless, most members agreed that the Fed could further reduce rates later in 2025, projecting on average two more cuts this year. According to CME FedWatch, the next rate cut is expected on October 29 with a 92.5% probability. However, some members predicted fewer cuts — or none at all — while at least one anticipated more than two.

Regarding the Fed’s balance sheet, officials stressed that amid declining reserves, it is important to monitor money market conditions closely and assess whether reserves are approaching an adequate level.

While this could be interpreted as a sign that the Fed is nearing the end of its balance sheet reduction, Fed Chair Jerome Powell told Yahoo Finance on September 17 that the central bank is comfortable with the current pace of asset runoff.

Major stock indices responded to the FOMC minutes with gains: the S&P 500 rose 0.6%, and the Nasdaq rose 1.1%. Cryptocurrency market capitalization increased by 1.5% over the past 24 hours, although the crypto revolution stalled at the last minute.

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