On November 8th, Caixin News (Editor: Niu Zhanlin) reported that in September, the market generally expected the Fed to cut rates by 25 basis points in both November and December. However, with a series of economic data releases and President Trump's resurgence, analysts point out that the Fed's interest rate path is now filled with uncertainty, and no one can be sure.

In an attempt to prevent the significant rate hikes of the past two and a half years from unnecessarily dragging down economic growth, the Federal Reserve approved a 25 basis point rate cut on Thursday, but hinted at more uncertainty in the speed of future rate cuts.

The market has already reduced the bets on another rate cut in December. The CME Rate Watch tool shows that the probability of the Fed keeping rates unchanged in December is 32%, significantly higher than the 14% a month ago.

Federal Reserve Chairman Powell stated that the U.S. election will not impact the Fed's decisions in the short term, and it is too early to assert how the policies of the next administration will reshape the economic outlook.

According to Citigroup data, investors in the interest rate futures market have steadily lowered their expectations for the magnitude of rate cuts by the Federal Reserve over the next year. They now anticipate that by 2026, the Fed will lower rates to around 3.6%, below the low point estimated in September of 2.8%.

Federal Reserve officials are trying to bring interest rates back to a more 'normal' or 'neutral' level, neither stimulating nor inhibiting economic growth. However, they do not know what level of rates would be considered normal.

Looking further into the future, the uncertainty grows. Take for example the long-term economic forecasts released by the Fed policymakers at the September meeting. These data show that 19 policymakers believe that by the end of 2025, rates will fall between 3.25% and 3.5%, indicating a cumulative 100 basis point cut by 2025; in 2026, there will be a 50 basis point cut, and rates will be maintained between 2.75% and 3% in the long term.

There are too many variables in the future.

But from the current perspective, the September forecast seems to have become a 'joke.' When asked about how to view the significant changes in expectations, Powell pointed out that the economy has improved significantly since September.

"Overall, economic activity is stronger than expected," he referred to non-farm employment data, retail sales, and recent revisions by the US Bureau of Economic Analysis to a series of data. "You can dispel a feeling that some downside risks to economic activity have diminished."

Chief US economist Diane Swonk of KPMG states: "From now until the December meeting, there is much to understand, they cannot completely open the door, but they cannot leave no room for maneuver."

"Slowing down the pace of interest rate cuts is something we are just starting to consider," Powell said. "As we approach or are very close to the neutral interest rate level, it may be appropriate for us to slow down the pace of monetary policy easing."

As for next year's monetary policy, we cannot overlook the impact brought by Trump. Powell emphasized that changes in fiscal policies such as tax cuts take a long time to pass through Congress, and after that, it will take more time for these policies to affect the economy, and the Fed must react to it.

However, some policy changes do not necessarily need to go through the complete legislative process, such as Trump imposing tariffs on various countries, which may push up prices, while also dragging down economic growth, putting the Fed in a dilemma.

Analysts point out that the potential political tensions between the Fed and the White House are another uncertain factor that needs attention. When asked if he believed the president could dismiss him or other senior officials before their terms ended, Powell reaffirmed his long-standing view with a concise response that goes against the norm: "The law does not allow this."

Editor / jayden