Preview of tonight's Fed rate decision: An October rate hike "pause" is almost certain, with how it affects the probability of a December hike becoming the focal point.

October 28 - The Federal Reserve will announce its October interest rate decision tonight (2 AM Beijing time on the 29th). The market widely expects the target range for the federal funds rate to remain unchanged at 3.75%-4.00%, with a probability of over 90%. The real focus is not on the hold itself, but on the wording of the Fed's statement and whether Chair Warsh will release more hawkish signals at the press conference, as well as how the meeting will affect the currently heavily priced probability of another 25 basis point rate hike in December. Several institutions' forward-looking views on the Fed meeting are as follows:

Goldman Sachs: Expects the Fed to pause rate hikes in October and raise rates by 25 basis points in December. If the FOMC continues the pace of hiking every other meeting in 2027, it may consider another hike in March. However, our baseline forecast does not expect a rate hike in March, as inflation trends are expected to improve.

Citi: Expects the Fed to pause rate hikes in October and raise rates by 25 basis points in December. However, if continued stock market weakness leads to a sharp tightening of financial conditions, the likelihood of the Fed shifting to rate cuts next will increase significantly.

Moody's: The Fed will not raise rates again when it meets this week, nor should it. The U.S. economy is being threatened by increasing risks, and the Fed's missteps are one of them. The bond market is a reason the Fed does not need to rush to tighten financial conditions.

Credit Agricole: Expects the Fed to pause rate hikes in October and raise rates by 25 basis points in December. The mainstream preference among policymakers leans toward keeping rates unchanged; although current inflation data has widened policy disagreements, it has not yet reached the threshold to force the Fed to act immediately in October.

Nomura Securities: Expects the Fed to keep rates unchanged in October. Dovish officials' remarks, emerging credit pressures, and the approaching midterm elections all favor a pause in rate hikes this time. The Fed is guiding the market to expect a pause in October while retaining full policy flexibility for resuming rate hikes in December.

TD Securities: Expects the Fed to keep rates unchanged in October. The possibility of a surprise rate hike is higher than normal, but we believe the committee will prioritize patience and wait until December to act. Holding steady in October will make a December rate hike more likely. We expect the Fed to raise rates two more times, in December and March.

Huatai Securities: Recent economic data have been mixed, but most Fed officials have indicated they are not inclined toward consecutive rate hikes, and financial conditions have also tightened somewhat. We expect the October meeting to keep rates unchanged, with possibly 2 hawkish voting members dissenting. Under the baseline scenario, the Fed will raise rates once more in December this year and twice next year.

Morgan Stanley: We expect the Fed to keep rates unchanged in October while signaling to the market that further tightening may still lie ahead. We anticipate the Fed will raise rates by 25 basis points in December and again in March next year, with overall risks still skewed toward additional tightening.

BNY Mellon: We expect the Fed to pause rate hikes in October and raise rates by 25 basis points in December. We anticipate that rates will not rise steadily at every meeting, but will peak at a level slightly above 4.5%, implying roughly three more hikes by this time next year.

Bank of America: The Fed has ample reason to raise rates in October. If it holds steady in October, the Fed will retain only a one-shot option; if it hikes in October, it can preserve flexibility for further hikes in December, aligning the hiking cycle more closely with rate-cut expectations for 2024 and 2025. Given more threatening inflation data, the latter approach carries greater strategic value.