U.S. Federal Reserve Chairman Jerome Powell holds a press conference after the Federal Reserve cut interest rates by a quarter point in Washington, DC, on October 29, 2025.
Kevin Lamarque | Reuters
Despite a major change looming in the long-term direction of central banks, this week’s Federal Reserve meeting provided little suspense and likely no major action.
Based on market expectations and comments from policymakers, there is virtually no chance the Fed will change its benchmark rate at the end of Wednesday’s meeting.
Despite recent disagreements among Federal Open Market Committee members about the long-term trajectory of monetary policy, the short-term stance will likely remain patient as a series of rate cuts last year have an effect on the broader economy.
“Overall, the Fed just wants to sit back and watch. I feel like there’s time to wait and see,” former Fed Vice Chairman Roger Ferguson said in an interview with CNBC on Monday. “This feels like a wait-and-see meeting, where we should all listen to see if there are any hints or biases toward future action.”
Where the FOMC goes from here will be clear from the post-meeting policy statement and Chairman Powell’s subsequent press conference. Markets currently expect the Fed to cut rates once or twice this year, likely in June and December, according to futures market prices as measured by CME Group’s FedWatch tool.
But beyond the interest rate decisions and future guidance, the focus is undoubtedly on the unprecedented web of intrigue surrounding the meeting.
Storm around Powell
As an example, President Donald Trump told CNBC last week that he may have narrowed the search for Powell’s successor to one candidate, who he said could be announced this week, perhaps coinciding with the Fed’s interest rate decision.
“If there’s one time that’s most likely, it’s during the FOMC period in January, especially if President Trump is watching.”
“This is to take attention away from the Fed’s failure to cut rates,” Stephanie Ross, chief economist at Wolf Research, said in a note. “More broadly, a decision could be made as early as this week or in the coming weeks.”
Also working in the background: The Justice Department subpoenaed Mr. Powell for information about a major renovation project at the Fed’s Washington, D.C., headquarters. In an unusually candid videotaped statement, Powell said the investigation was a “pretext” for President Trump’s desire to bully the Fed into lowering interest rates more aggressively than in recent months.
There is uncertainty in other areas, too, with President Trump seeking to fire Fed Director Lisa Cook over mortgage fraud allegations before the U.S. Supreme Court last week, and the term of Trump appointee Stephen Millan set to expire on Saturday. It is unclear how long Mr. Millan will remain on the board, as Fed directors serve until replaced. He opposed each of last year’s three quarter-point rate cuts and supported even larger measures.
So while markets pay close attention to interest rate developments and indicators, much of their scrutiny is focused on ancillary events that have shaken up central banks.
political pressure
“The Fed is politically pressured to cut rates, but not data-wise,” said Gregory Daco, chief economist at EY Parthenon. However, Mr. Powell is “likely to refrain from commenting directly on the Justice Department investigation involving him and the Fed, or the pending Supreme Court decision involving Governor Cook.”
However, that doesn’t stop the media from asking questions.
“Mr. Powell will be asked about the video he warns is being sought by the Trump Justice Department’s subpoenas and other actions.”
“We believe he stands by everything he says and expresses confidence in the Supreme Court as the final arbiter of Fed independence,” Krishna Guha, head of global policy and central banking strategy at Evercore ISI, said in a memo.
Barring further political developments, the focus will return to policy.
Markets are trying to figure out whether this month’s hold is hawkish and portends a longer period of no rate cuts, or dovish as Powell and the committee have signaled that more rate cuts are possible rather than now.
Morgan Stanley Chief Economist Michael Geipen is expected to lean dovish.
“While we believe recent labor market stabilization and strong economic activity data will be the primary factors in the decision to pause rate cuts, upcoming inflation data should give the Fed enough confidence in disinflation later this year to maintain an accommodative bias,” Gapen said in a note. “I don’t think committee members are ready to signal an end to the reduction cycle.”
Gapen is also considering several changes in his post-meeting statement, likely to reflect the removal of language about improving economic growth and increasing downside risks to employment.
