Bitget App
Trade smarter
Open
HomepageSign up
Bitget>
News>
Markets>
Stubborn Inflation and Tightening Liquidity Prompt Fed to Reverse Course on Policy

Stubborn Inflation and Tightening Liquidity Prompt Fed to Reverse Course on Policy

Bitget-RWA2025/10/27 15:50
By: Bitget-RWA
- Fed to cut rates by 0.25% and pause QT, reversing two-year liquidity-draining strategy amid labor market fragility and stagflation risks. - 5-week government shutdown slashes 0.2% weekly GDP growth, exacerbating labor market strain and corporate balance sheet adjustments. - Intel and Eversource Energy restructure finances through debt reduction and asset sales amid macroeconomic uncertainty. - Fed's QT halt aims to prevent reserve scarcity as repo rates rise, with potential balance sheet expansion planne

This week, the Federal Reserve is expected to unveil a major change in its monetary policy, with plans to lower short-term interest rates by 0.25 percentage points and bring its balance sheet reduction—known as quantitative tightening (QT)—to a stop. Fed Chair Jay Powell outlined this policy shift in his October 14 address, signaling an end to the central bank’s two-year campaign to withdraw liquidity from the financial system. At least one dissent is anticipated from newly appointed Governor Stephen Miran, who has pushed for deeper rate cuts due to worries about a softening job market and persistent inflation threats, according to

.

This policy adjustment comes as the ongoing government shutdown continues to drag on economic growth, reducing real GDP by about 0.2% each week and intensifying concerns about a drawn-out slowdown. Now in its fifth week, the shutdown has left 750,000 federal employees without pay and disrupted hiring at state and local levels, adding to the strain on a labor market already showing signs of weakness. The Fed’s October Beige Book pointed to “stagflationary” trends, such as persistent inflation in services and “opportunistic pricing” by companies, fueled by less competition and higher tariffs, as highlighted in KPMG’s report.

Stubborn Inflation and Tightening Liquidity Prompt Fed to Reverse Course on Policy image 0

The move to end QT also stems from rising worries about liquidity in the overnight fed funds market, where reserves are shrinking as balance sheet reduction nears its end.

and analysts point out that higher repo rates and funding strains suggest the system is approaching a “reserve scarcity” situation, prompting the Fed to stop QT and keep reserves plentiful to support market stability, according to . The central bank is expected to begin expanding its balance sheet again within half a year, offsetting new asset purchases by reducing reserves held by banks, which currently total $3 trillion, KPMG’s primer notes.

Companies are also adjusting their finances. Intel, under new CEO Lip-Bu Tan, has focused on cutting debt and increasing operational flexibility, supported by $8.9 billion in government funding and a $5 billion investment from Nvidia. The company’s CFO stressed a cautious approach to capital expenditures, in line with Tan’s strategy of “waiting for demand before investing,”

reported. Likewise, Eversource Energy’s stronger balance sheet—helped by regulatory clarity and asset sales—has led Mizuho to raise its price target, reflecting greater investor trust in the company’s financial strength, reported.

The Fed’s decision to cut rates and pause QT comes just before the release of key inflation data, including the September CPI report, which showed inflation rising less than expected. While this gives the Fed more room to focus on supporting jobs, experts warn that rate reductions alone may not be enough to counteract the negative effects of the shutdown and tariffs. The October 24 economic calendar on includes important data points like core CPI and manufacturing PMI, which could influence the Fed’s ultimate policy choices.

With early signs of stress in the repo market and companies adapting to changing economic conditions, the Fed’s actions indicate a shift toward supporting growth while keeping inflation in check. As markets prepare for a record $31 billion in

options expiring on Halloween and the Fed’s anticipated rate cut next week, the outlook remains highly uncertain, as reported by .

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
PoolX: Earn new token airdrops
Lock your assets and earn 10%+ APR
Lock now!

You may also like

Bitcoin Updates: Major Holders Accumulate $260M in Bitcoin While ETFs See $799M Withdrawn

- Bitcoin, Ethereum, and XRP fell in early November amid waning demand, ETF outflows ($799M for Bitcoin), and $2.6B in exchange withdrawals linked to whale activity. - Technical indicators showed bearish signals: Bitcoin below key EMAs, Ethereum near $3,700 support, and XRP's open interest declining as pressure mounted. - Despite short-term selloffs, Ethereum ETFs saw $9.6B Q3 inflows, while structural bulls controlled 68.6% of Bitcoin supply, hinting at potential accumulation phases. - Macroeconomic risks

Bitget-RWA2025/11/03 12:32
AI Critics Caution About Potential Bubble as Teleskope Raises $25 Million to Address Cybersecurity Risks

- Alex Chen’s Teleskope secures $25M to develop AI-driven cybersecurity tools, targeting advanced threats with real-time data analysis. - The global threat intelligence market, projected to hit $22.97B by 2030, sees investor confidence in AI solutions, with Sequoia and Andreessen backing Teleskope. - Rising AI-powered threat detection adoption, like Inversion6’s MDR platform, highlights the sector’s competitive landscape and cross-industry AI growth. - Skeptics warn of an "AI bubble," citing overvaluation

Bitget-RWA2025/11/03 12:16
Freshpet's Third Quarter Jump Overshadows Legal Troubles and Updated Growth Alerts

- Freshpet's Q3 2025 net sales surged 14% to $288.8M, driven by volume gains and price/mix adjustments, surpassing expectations. - The company achieved positive free cash flow early and revised 2025 guidance to $190-195M adjusted EBITDA with reduced capex. - Legal risks emerged as Rosen Law Firm launched a securities class action alleging misleading disclosures after a 6.36% stock drop. - Analysts remain cautiously optimistic with a "buy" rating and $70 median price target, despite recent 6.7% monthly shar

Bitget-RWA2025/11/03 12:16
IREN's $9.7B Agreement with Microsoft Draws Doubts as Insiders Sell Shares, Experts Caution

- IREN secured a $9.7B GPU cloud contract with Microsoft, including 20% upfront prepayment, to deploy NVIDIA GB300s over five years. - The deal involves $5.8B in GPU procurement from Dell, with Texas data center deployment starting in 2026 using liquid-cooled infrastructure. - IREN's stock surged 22% pre-market, but faces analyst skepticism over valuation risks and insider sales of 2M shares by co-CEOs. - Institutional investors showed mixed positions, while analysts warned about liquidity strains from pre

Bitget-RWA2025/11/03 12:16

Trending news

More
1
Bitcoin Updates: Major Holders Accumulate $260M in Bitcoin While ETFs See $799M Withdrawn
2
AI Critics Caution About Potential Bubble as Teleskope Raises $25 Million to Address Cybersecurity Risks

Crypto prices

More
Bitcoin
Bitcoin
BTC
$107,869.81
-2.61%
Ethereum
Ethereum
ETH
$3,716.07
-4.08%
Tether USDt
Tether USDt
USDT
$0.9999
+0.01%
XRP
XRP
XRP
$2.41
-5.45%
BNB
BNB
BNB
$1,019.15
-6.05%
Solana
Solana
SOL
$175.91
-5.22%
USDC
USDC
USDC
$0.9999
+0.01%
TRON
TRON
TRX
$0.2922
-1.19%
Dogecoin
Dogecoin
DOGE
$0.1747
-6.29%
Cardano
Cardano
ADA
$0.5773
-5.66%
How to buy BTC
Bitget lists BTC – Buy or sell BTC quickly on Bitget!
Trade now
Become a trader now?A welcome pack worth 6200 USDT for new users!
Sign up now
Trade smarter