Record shutdown, mixed signals leave US markets on edge ahead of Fed call
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What is shaping up to be one of the most fractious Federal Reserve policy meetings in years could become a crucial preview of how U.S. monetary policy debates will evolve in 2026. As the two-day meeting began on Tuesday, financial markets were firmly expecting an interest rate cut, even as the central bank’s policy makers appear increasingly divided. Investors have endured weeks of uncertainty—compounded by a record 43-day U.S. government shutdown, conflicting public remarks from Fed officials, and the steady drumbeat from President Donald Trump’s administration pushing for cheaper borrowing costs. Market pricing for a quarter-percentage-point cut to the 3.50–3.75% range surged from 30% three weeks ago to 87%, accelerated by New York Fed President John Williams’ recent support for an “insurance” cut. Major investment banks, including Morgan Stanley, J.P. Morgan and BofA quickly shifted their forecasts to align with expectations of a Decem...