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With an interest rate cut a near certainty Wednesday, markets will look for what guidance Fed Chair Jerome Powell will provide for the next meeting in December. Bank of America economists think that with the current lack of economic data due to the government shutdown, Powell's likely inclination would be to seek another reduction before the end of the year. However, Powell is unlikely to commit following Wednesday's meeting. "We think the Fed will acknowledge the recent strength of economic activity. But the broader shift in focus toward the labor mandate probably won't change," Bank of America U.S. economist Shruti Mishra said in a note. "Powell is also unlikely to offer much guidance beyond this meeting given the lack of official sector data and the current labor-consumption conundrum." A report from ADP on Tuesday indicated that private payrolls picked up slightly over the past four weeks from their anemic growth path this year. Should the government impasse end and official data show further signs of stabilization in the labor market, that would discourage a December cut, Mishra said. —Jeff Cox The Federal Reserve will have more business to conduct beyond the expected interest rate cut at this week's meeting. Along with the fully priced-in quarter percentage point reduction, the central bank is expected to discuss ending its balance sheet reduction, known as quantitative tightening. The Fed is still allowing a small amount of proceeds from its bond portfolio to roll off each month, rather than reinvesting. However, markets will be looking for a clear indication that the program either is ending soon, or could conclude in October. "I won't be surprised if they stop it at the meeting," said Luke Tilley, chief economist at Wilmington Trust. "It's probably more likely that they would say it's going to stop or taper down over the next 'x' number of weeks, four weeks or six weeks, and provide that guidance." Fed officials also could note the challenges the face with the lack of official economic data during the government shutdown, and may tinker with wording in the post-meeting statement on economic conditions. —Jeff Cox
