Fed Expected to Deliver More Rate Cuts as Inflation Eases Slightly
The Federal Reserve is expected to cut interest rates by a quarter point at each of its next three policy meetings, according to trader forecasts on Friday. The shift in sentiment came after new data showed that U.S. inflation rose less than expected in September.
The Consumer Price Index (CPI) increased 3.0% year over year through September, the Labor Department’s Bureau of Labor Statistics reported. That marks a small rise from 2.9% in August, but still below the 3.1% forecast by economists surveyed by Reuters.
Easing Inflation Boosts Fed Confidence
Analysts say the data could reassure even the Federal Reserve’s more hawkish members that lowering borrowing costs won’t reignite inflation. “As odd as it may seem, the Fed will be happy with inflation staying around 3% for the next couple of months,” said Olu Sonola, head of U.S. economic research at Fitch Ratings.
This moderation in inflation strengthens the case for continued monetary easing to support the labor market and broader economic growth.
Markets Price In Three Consecutive Rate Cuts
Futures contracts linked to the Fed’s policy rate show near 100% certainty that officials will reduce the federal funds rate to 3.75%–4.00% at next week’s meeting. Traders also see a 95% probability of another cut in December, and roughly a 55% chance of a third reduction in January — up from less than 50% before the latest inflation report.
These expectations reflect growing market confidence that the Fed’s rate-cutting cycle will continue into early 2026 as price pressures ease and economic growth stabilizes.
