Market participants were laser focused on the Federal Reserve’s rate-cut decision last Wednesday (Oct. 29) and the subsequent news conference held by Chair Jerome Powell.
CNBC summarized five key takeaways from the day’s Federal Reserve news, presented in a condensed version here:
- “The Federal Open Market Committee, as expected, delivered its quarter percentage point rate cut, but not without some backstage intrigue that included two dissenting votes—one in each direction. …
- “Using uncharacteristically strong language, Chair Jerome Powell pushed back hard on another cut in December for which markets had been assigning about a 90% probability of happening. …
- “Markets knew the end of QT was coming, but just weren’t set on when. The committee laid that to rest and said quantitative tightening, or allowing assets to roll off the Fed’s $6.6 trillion balance sheet, would end after the November operations. …
- “On the question of inflation, Powell gave indications that it is drifting back towards the Fed’s 2% goal but remains elevated—around 2.8% by the Fed’s preferred measure. …
- “Powell gave a nod towards the uncertainty from the shutdown, but said the lack of public data likely doesn’t change the economic picture, one of moderating growth, rising unemployment and ‘somewhat elevated’ inflation.”
FIGURE 1: FEDERAL FUNDS TARGET RATE
Note: The federal funds target rate, the midpoint in the range set by the Federal Reserve for interest rates, was reduced in October to 3.875%, falling by 0.25 percentage points.
Sources: Board of Governors of the Federal Reserve System via FRED, CNN
Fidelity commented on the Fed’s upcoming rate decisions:
“While the Fed had enough momentum for this rate cut, the lack of new data is making it harder to understand where policy may go next.
“In particular, one key question for policymakers is whether the job market continues to soften or has stabilized, says Kana Norimoto, macro strategist on Fidelity’s fixed income research team.
“Federally reported data isn’t the Fed’s only source of economic information. It also gathers data and anecdotal evidence from its 12 regional Reserve Banks. And some private companies report on payroll data. But those extra data points are better suited to fill in the gaps—not to replace the solid foundation that official government reports provide.”
Where is the economy headed?
The Atlanta Fed’s GDPNow forecast projects robust economic growth of 4.0% for Q3 2025. (As discussed previously, shifts in export/import data attributed to tariff policy can have a significant impact on GDP growth rates versus the prior year.)
As shown in Figure 2, the GDPNow estimate is considerably higher than the average projection from leading economists—though their forecasts have been trending upward.
FIGURE 2: EVOLUTION OF ATLANTA FED GDPNOW 2025 REAL GDP ESTIMATE—Q3
Sources: Blue Chip Economic Indicators and the Blue Chip Financial Forecasts
EY-Parthenon’s (Ernst & Young) September 2025 economic outlook presents a more conservative view of GDP growth:
Related Article: ‘Liberation Day’ revisited: The impact of tariff policy
The Fed’s concerns reflect those of many U.S. consumers
The Federal Reserve’s 25-basis-point rate cut to 3.75%–4.00% signaled, in policy language, that growth is losing steam, the labor market is no longer tight, but inflation hasn’t finished its descent.
That message echoes the simpler descriptions of the economy offered by many households: jobs seem less secure, and prices still feel high. October readings from the University of Michigan and the Conference Board indicate that sentiment levels remain low, as consumers continue to worry about job losses and the rising cost of living.
The University of Michigan’s index of consumer sentiment fell to 53.6 in October, far below pre-COVID norms and significantly lower than October 2024. The index of consumer expectations was more than 20 points below the same period of 2024. According to the statement accompanying the data release, “inflation and high prices remain at the forefront of consumers’ minds.”
TABLE 1: FINAL RESULTS FOR OCTOBER 2025: UNIVERSITY OF MICHIGAN SENTIMENT MEASURES
Source: University of Michigan
FIGURE 3: UNIVERSITY OF MICHIGAN—INDEX OF CONSUMER SENTIMENT
Source: University of Michigan
The Conference Board’s recent consumer data showed similar results.
Yahoo Finance reported,
“Consumer confidence in October slid for a third consecutive month, hitting its lowest level since April when President Trump’s tariff announcements sent shock waves through the economy.
“The latest index reading from The Conference Board showed a small 1.0 point decline on a monthly basis in October to 94.6 as consumers’ view of current business and labor conditions improved slightly. Short-term expectations for income, business, and labor market conditions, however, weakened by 2.9 points and continued to remain below a threshold ‘that typically signals a recession ahead,’ The Conference Board said.”
FIGURE 4: THE CONFERENCE BOARD—PRESENT SITUATION AND EXPECTATIONS INDEX (OCT. 2025)
Sources: The Conference Board, NBER
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