What to Watch at the Federal Reserve’s October Meeting

The Federal Reserve is expected to lower interest rates on Wednesday by a quarter of a percentage point for the second meeting in a row.

The decision reflects the central bank’s view that it can afford the risk of temporarily higher inflation in order to support the labor market from weakening too much. That strategy is a precarious one and depends in large part on price pressures stemming from President Trump’s tariffs fading over time and the economy continuing to lose momentum rather then stabilize at current levels.

The stakes are high. Depending on how much the Fed cuts interest rates from here, it could either inadvertently fuel inflation or cause undue harm to the labor market. As Jerome H. Powell, the chair, has repeatedly put it, there is “no risk-free path.”

This dilemma has spawned a range of views inside the Fed about how to proceed, a debate that has become all the more complicated now that the government shutdown has made it far more difficult for officials to know how the economy is actually faring.

On Wednesday, the Fed will release a new policy statement alongside its rate decision at 2 p.m. in Washington. Mr. Powell will hold a news conference at 2:30 p.m.

Here is what to watch for:

Queuing up a December cut?

In September, most officials at the Fed predicted quarter-point interest rates cuts at the two remaining meetings of the year, in October and December. With the October reduction now all but guaranteed, attention has shifted to whether the central bank will follow through with what policymakers forecast.