An interim September jobs report by the Chicago Fed last month showed unemployment remaining around 4.3%, a four-year high. On Tuesday, the Conference Board’s Expectations Index, a widely watched measure of economic sentiment remained below the threshold that typically signals a coming recession.
The Federal Reserve’s concerns trumped those about inflation, which has remained stubbornly above the bank’s target of 2% annually. The Consumer Price Index rose 3% in the 12 months through September, the Bureau of Labor Statistics said, continuing an upward trend that began after a 2.3% reading in April.
On Tuesday, the CME FedWatch Tool, which uses futures trading data to infer trader sentiment, predicted a more than 99% probability of a .25% rate cut. On Myriad, a prediction market that tends to offer a more conservative forecast, showed about 90% of respondents expecting the same. (Disclaimer: Myriad is a unit of Dastan, the parent company of an editorially independent Decrypt.)
Investors awaited Fed Chair Jerome Powell’s comments on ending the bank’s quantitative tightening. The bank has been unloading Treasuries and mortgage-backed securities as it aimed to bolster financial markets and wrestle inflation under control a few years ago when the economy was on shakier ground.
A turn toward less restrictive monetary policy with a higher tolerance for inflation, coupled with lower rates injecting liquidity into markets, could bolster Bitcoin and other risk-on assets, said some analysts in the run-up to the Fed’s decision.
Last month, the Fed slashed the federal funds rate by 0.25%, its first cut since last year. The previous inaction had angered U.S. President Donald Trump, who, fearful of being associated with an economic cratering, criticized Powell regularly and threatened to fire him.