NextFin news, On Friday, October 3, 2025, Vishy Tirupattur, a strategist at Morgan Stanley, declared that the Federal Reserve's next monetary policy move is effectively decided, forecasting a 25 basis point rate cut at the Fed's October 29 meeting. This statement was made during a discussion on Bloomberg Real Yield, where Tirupattur spoke alongside Jamie Patton from TCW.
Tirupattur emphasized that despite the complications arising from the ongoing U.S. government shutdown, which has disrupted the availability of key economic data, the Fed's path toward easing monetary policy is clear. He expects a sequence of rate cuts: one in October, another in December, followed by a January pause, and potentially additional cuts in April and July 2026.
The government shutdown has led to a lack of timely and reliable economic data, particularly labor market statistics, which are crucial for the Fed's decision-making. Austan Goolsbee, President of the Chicago Fed, highlighted that the shutdown has deprived policymakers of their usual high-quality data, complicating economic assessments.
Jamie Patton noted that the shutdown's impact extends beyond data gaps to actual lost productivity and economic activity. Unlike previous shutdowns, this one is marked by the administration's inclination toward permanent job cuts rather than furloughs, which could have a more lasting effect on employment statistics and economic recovery.
Market consensus anticipates that economic activity lost in the fourth quarter due to the shutdown might be recovered in the first quarter of 2026. However, Tirupattur and Patton cautioned that this shutdown differs significantly from historical precedents, making the recovery outlook uncertain.
Despite these uncertainties, Tirupattur maintains that credit fundamentals remain strong, providing a solid starting point for the economy as the Fed embarks on its rate-cutting cycle.
This outlook aligns with other market forecasts, including Bank of America Global Research, which recently moved forward its forecast for the Fed's first rate cut to October from December, citing signs of economic slowing.
The Federal Reserve's anticipated rate cuts come amid a complex economic environment shaped by disrupted data flows, government shutdown effects, and evolving labor market conditions. Policymakers face the challenge of navigating these uncertainties while aiming to support economic growth and stability.
Source: Bloomberg, October 3, 2025.
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