The Federal Reserve is widely expected to cut rates by 25 bps this week, bringing the target range to 3.75–4.00%.
Markets are also closely watching for signals on when quantitative tightening (QT) might end. Markets expect Chair Powell to maintain an easing bias but stress a cautious, meeting-by-meeting approach as the Fed weighs softening labour data against still-elevated inflation. According to the CME FedWatch tool, traders are pricing in another 25 bp cut in December and a further 50 bp reduction early next year.
Since the Fed resumed rate cuts in September, Treasury yields have declined and inflation expectations have cooled, reflecting confidence in the central bank’s policy path despite the ongoing U.S. government shutdown.
Money market conditions have tightened as Treasury cash balances rose, and markets anticipate QT could end as early as December to ease year-end funding pressures. With key U.S. data delayed by the shutdown, the Fed is effectively flying blind into this meeting, relying more on private-sector indicators for guidance.
For commodity traders, a shift toward monetary easing carries significant implications. A rate cut generally weakens the U.S. dollar, making dollar-priced commodities cheaper for foreign buyers and boosting demand. Precious metals like gold and silver typically benefit from lower yields and a softer dollar, while industrial metals and crude oil may gain from improved growth sentiment. However, if rate cuts are interpreted as a signal of economic weakness, demand-side concerns could temper rallies in energy and base metals.
Overall, expectations of a dovish Fed stance are supporting risk appetite across global markets. Commodity traders should watch Powell’s tone and the Fed’s forward guidance closely, as these cues could shape market trends into the final quarter of the year.
The Federal Reserve is set to announce its policy decision today at 11:30 IST, with the FOMC widely expected to deliver a 25 bps rate cut. Markets will closely track both the decision and Chair Powell’s press conference scheduled for 12:00 AM midnight.
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