#OctoberRateCutForecast

Fed Officials Split on Rate Cuts: Will the Third Cut of 2025 Happen This Month?

The global financial stage is holding its breath as the U.S. Federal Reserve approaches its October policy decision. Within the Fed, a distinct split has emerged one side urging caution, the other pressing for decisive action all with one critical question in focus:
Should the Fed deliver the third rate cut of 2025 now, and how deep should it go?

Waller Advocates for a Gradual Approach

Fed Governor Christopher Waller has called for a measured 25-basis-point cut, favoring a data-driven path that ensures stability without reigniting inflation.
He points to:

A cooling labor market,

Steady inflation progress, and

Moderate consumer spending

Waller’s stance: Ease cautiously not reactively to preserve confidence and control.

Mester Pushes for Stronger Action

Meanwhile, Cleveland Fed President Loretta Mester takes a more assertive tone, arguing that the economy faces growing downside risks from global weakness and tighter credit conditions.
Her message: Act boldly now to avoid a harder landing later.
With softening business investment and waning consumer confidence, Mester believes a larger cut could preempt deeper trouble.

The Economic Crossroads

The debate captures the Fed’s delicate balancing act taming inflation while sustaining growth.

Inflation has dropped sharply since its 2022 highs but remains above the 2% goal.

The labor market shows resilience yet hints of cooling, with rising jobless claims.

GDP growth is slowing, housing and retail have weakened, and consumer sentiment has turned cautious.

Each data point adds pressure on policymakers to strike the perfect balance.

Market Expectations

Financial markets appear confident that a 25-basis-point cut is on the table the third cut of 2025. Futures data suggest a 70–80% probability of action this month, signaling that investors expect the Fed to stay the course on cautious easing.

Yet, whispers of deeper cuts remain in play if inflation cools faster or if growth falters. Traders are watching closely for any hint of a pivot toward more aggressive easing.

Market Implications

A smaller cut may reassure investors that inflation control remains the Fed’s top priority.

A larger move could fuel risk assets equities, crypto, and commodities but also spark concern that the economy needs stronger medicine.

Either way, October’s decision could define the global financial tone heading into 2026, influencing currencies, capital flows, and investor sentiment worldwide.

Final Take

The Fed stands at a crucial crossroads between caution and conviction.
Waller champions steady steps, Mester demands decisive motion.
Now, the world waits:
Will the Fed “go small” to sustain control, or “go big” to safeguard growth?

Whatever the outcome, October’s policy meeting promises to be one of 2025’s most pivotal market moments.