Fed's October 29 Meeting: Eyes on the Markets

American Federal Reserve (Fed) is facing uncertainties due to the partial government shutdown as it approaches its meeting on October 29. The delay of the September labor report complicates the Fed's decision-making process.

The general expectation in the markets is that the Fed will implement a 25 basis point interest rate cut. However, the lack of labor data and persistent inflation create significant uncertainty for the Fed's next move.

Currently, Cryptocurrencies and U.S. stocks, which are trading at high valuations, could experience sharp downward movements if the Fed unexpectedly delays a loosening decision and sends a cautious message.

The partial government shutdown that began on October 1 caused critical services like the American Bureau of Labor Statistics (BLS) to close. This situation has postponed the publication of the September employment report for an indefinite period. This data was considered an important indicator ahead of the Federal Open Market Committee (FOMC)'s meeting on October 28-29.

Despite this, market optimism continues. According to GoldPrice.org, gold prices reached $3,886 per ounce on Friday, showing an increase of over %48 since the beginning of the year. The rally in gold in 2025 is supported by large purchases from central banks and demand for ETFs from individual investors.

As of writing, Bitcoin is trading at approximately $123,196 and was near the day's high of $125,506. This rise is supported by institutional interest and cryptocurrency ETF inflows. Additionally, the Dow Jones Industrial Average and S&P 500 closed at historic peaks of 46,758.28 and 6,715.79, respectively.

Market expectations are shaped around a 25 basis point Fed cut. The CME Group's FedWatch tool indicates a 96.2% probability for this cut. An alternative prediction platform, Polymarket, shows a 3% probability for a cut of more than 50 basis points, 90% for a 25 basis point cut, and 8% for no cut.

It is suggested that the Fed's decision to halt interest rate cuts is not an unlikely scenario, contrary to market expectations. The government shutdown has caused BLS employees to go on leave, hindering the publication of vital employment reports. This situation leaves the Fed without data to base its interest rate decision on.

The inadequacy of leading market indicators increases the risk that some Fed members may propose to halt the current pace of interest rate cuts. Without a clear view of the labor market, early easing decisions may risk disrupting inflation expectations. In earlier periods, the Federal Reserve has preferred to act cautiously to avoid implementing incorrect policies amid a data shortage.

On the other hand, many investors have positioned their portfolios in anticipation of further interest rate cuts, which means a surprise pause could cause volatility in the markets. The FOMC may consider maintaining a 25 basis point cut to sustain market confidence and address economic risks; however, the current uncertainties keep the probability of a pause strong.

In terms of economic indicators in October, private sector and Federal Reserve regional data may shed light. If these data show that inflation is cooling or growth is slowing, Fed Chairman Jerome Powell might continue with the expected 25 basis point cut. However, stronger signals of inflation persistence or growth resilience could steer the Fed towards a pause and shake market expectations. If the government shutdown ends, for example, around mid-October, the September labor report could be released on time, contributing to a clearer data picture in the markets.

The possibility of a 50 basis point cut is largely discounted in the markets. Inflation continues to exceed the Fed's target of %2, particularly with wage pressures in the services sector being felt. Thus, a half-point cut could be perceived as an early easing signal and negatively affect labor market and inflation expectations. Powell's public statements emphasize his cautious and data-driven stance; therefore, a more moderate 25 basis point cut is considered a prudent course of action.

Investors should consider ways to hedge their risks against a Fed pause scenario. Put options for Bitcoin and major stock indices can provide a suitable method for protection against rapid downward moves. Additionally, avoiding high leverage or large position sizes in volatile assets can help mitigate losses. Increasing allocations to safe havens, such as gold or Treasury bonds, may also assist in balancing the portfolio amid market stress.

In conclusion, the FOMC meeting on October 28-29 represents an important test for the market. The ongoing government shutdown casts uncertainty over vital labor data and creates a risky shadow over investors' and policymakers' expectations. The markets widely expect a 25 basis point interest rate cut; however, due to data uncertainty, the Fed’s decision to pause or delay could lead to sharp corrections in stock and cryptocurrency markets. Investors must closely monitor the special economic indicators and regional inflation data in October and take pragmatic measures against surprise volatility. A balanced risk stance will help navigate this uncertain macroeconomic environment.