The US Federal Reserve is widely expected to deliver its third straight interest rate cut on Wednesday, but the real focus for investors will be whether Chair Jerome Powell signals that the easing cycle is nearing a pause. While the quarter-point reduction is widely anticipated, the Fed’s ability to outline further cuts is expected to be limited by incomplete labour-market and inflation data. Last month’s shutdown has left policymakers with an unusually patchy view of the economy.

Most forecasters surveyed by Reuters expect a 25-basis-point reduction, taking the federal funds rate to 3.5-3.75 percent. Markets have also priced in high odds of a cut. But the central message from Powell is expected to lean cautious, with analysts at Goldman Sachs and other research houses noting that the bar for additional easing has risen as inflation remains stuck at 2.8 percent -- still well above the Fed’s 2 percent goal.

Economists cited in Bloomberg and CNBC reports expect Powell to highlight the need to wait for more complete economic data before contemplating further moves. The shutdown delayed key labour and inflation releases, leaving policymakers uncertain about how much underlying momentum the economy has retained. Some analysts anticipate a “hawkish cut”, where the Fed lowers rates today but hints that the pace of easing may slow from here.

The updated economic projections and the “dot plot” will be closely watched for clues about how far the committee thinks policy should go in 2026. Forecasts remain scattered, reflecting differing views on how persistent inflation will be and how much support the cooling labour market will need. While divisions within the committee are expected, the broader takeaway for markets is that policymakers are no longer united on the need for steady, sequential cuts.

Inflation remains the key constraint. As former Cleveland Fed President Loretta Mester told CNBC, inflation is “still well above the goal”, suggesting the Fed will want to keep policy “somewhat restrictive” even if it delivers one more cut today. Tariff-driven price pressures are adding to the uncertainty. So too is the unusually large gap between consumer and market inflation expectations.

Beyond the rate move, investors will look for signals on the Fed’s balance-sheet strategy after earlier indications that quantitative tightening may be halted. Any hint of shifting toward bond purchases -- even in a limited form -- would shape expectations for liquidity conditions into early 2026.

With markets nervous and US equities slipping earlier this week, the tone of Jerome Powell’s press conference may matter more than the cut itself. The decision is expected at 12.30 am (Thursday) India time, followed by Powell’s briefing, which will set the template for how the Fed intends to navigate the next stage of its inflation fight.