NEW YORK (NewsNation) — The Federal Reserve is expected to announce its latest move on interest rates Wednesday as the government shutdown enters its fourth week.
The shutdown has halted the flow of key economic reports that usually guide critical rate decisions, leaving the Fed without fresh data and market figures.
Investors expect the Fed to announce a rate cut for the second time this year, given the slowing job market. Given the lack of statistical updates, analysts said Fed officials may opt for caution.
A new University of Michigan survey showed consumer confidence continues to fall under the strain of inflation. Confidence is down to 53.6%, the survey found, down 1.5 points from last month and nearly 17% from a year ago.
Inflation ticked up in September
The September consumer price index report showed inflation accelerated as quickly as many feared, but the results were better than expected.
As a result, Wall Street has priced in nearly a 100% chance of a 0.25% rate cut.
Markets will be watched closely for the Fed’s 2 p.m. EDT announcement, and for Fed chair Jerome Powell’s address afterward.
“Overall, if they cut the market may move a tiny bit, and depending on what he says afterwards, that might move things a little bit up or down,” said Stephen Kates, a financial analyst for Bankrate. “But overall, we’re going to have a pretty tame response. If they don’t cut, the market will sell off, probably to the tune of 1% or more.”
The biggest surprise would be no rate cut at all. Economists are focused on what Powell says about the data used for this decision, as well as indicators of another cut in December.
What a Fed cut means for consumers
For consumers, a rate cut would bring lower borrowing costs on car loans, mortgages and credit cards. It’s intended to stimulate the economy and ease financial pressure.
Cheaper borrowing can also encourage businesses to invest and expand, creating jobs and potentially lowering unemployment, which rose above the 4.0% target in August — a key indicator the Fed will likely cut rates.
