Federal Reserve Likely to Cut Rates

The Federal Reserve will almost certainly reduce its key interest rate Wednesday, but the bigger question for financial markets and the economy is what signals Chair Jerome Powell may send regarding the central bank’s next steps. 

It would be the third cut in a row and bring the Fed’s key rate to about 3.6 percent, the lowest in nearly three years. For Americans struggling with high borrowing costs for homes, cars and other large purchases, this year’s rate cuts could reduce those costs over time — though it is not guaranteed. Mortgage rates, in particular, are also influenced by financial markets. 

This week's meeting could presage a much cloudier path for the Fed in 2026. The government shutdown has delayed two months of jobs and inflation data, leaving the Fed with much less information on hiring and inflation than it is accustomed. Powell’s term as chair ends in May, and President Donald Trump will nominate a replacement, possibly as soon as this month, who will almost certainly push for lower borrowing costs. Yet the new chair could face resistance from other established, knowledgeable Fed officials.

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