Fed Expected to Cut Rates 25 BPS Amid Uncertainty and Policy Divergence

Based on Jin10, the Federal Reserve is set to announce its interest rate decision and economic outlook summary on Thursday at 03:00 AM. Following rate cuts in September and October, markets widely anticipate another 25-basis-point cut, bringing the target federal funds rate to 3.50%-3.75%. However, the meeting is marked by high uncertainty due to missing key economic data from a government shutdown and internal FOMC disagreements. A 'hawkish cut'—lowering rates while signaling a more cautious future policy stance—has emerged as a likely strategy. Major Wall Street banks, including Morgan Stanley and JPMorgan, now expect the cut, with Morgan Stanley forecasting two more 25-basis-point cuts in January and April 2026. The absence of October employment and inflation data complicates the decision-making process, and at least five voting members are expected to oppose the cut. Meanwhile, concerns over liquidity and the potential for a 'reserve management purchase' program to ease market strains remain under discussion.