The Fed Is Expected to Cut Rates for a Third Time. Its Next Move Is a Mystery.

WASHINGTON — The Federal Reserve is widely expected to lower interest rates on Wednesday for a third, and potentially final, time this year. What comes next is less clear.

Fed officials lowered borrowing costs in July and September in an effort to guard against mounting risks, including President Trump’s uncertainty-inspiring trade war and a global manufacturing slowdown. They likened the moves to taking out insurance to protect the economy.

While officials have been less direct in signaling a cut this month than they were in arguing for those earlier moves, policymakers have done little to crush investor’s expectations for a quarter-point reduction at the Oct. 29-30 meeting. Many Fed watchers view that silence as a sort of confirmation, because the central bank tries to avoid surprising markets. Doing so can cause market gyrations that ultimately restrain growth.

The central question now is whether the economy will need further insulation going forward. Economic data look decent and unemployment is at a half-century low. Mr. Trump has indicated that a “Phase 1” trade deal with China could be signed next month, which could give businesses slightly more certainty.

But job gains are moderating, consumer sentiment gauges have softened this year and manufacturing continues to falter, keeping risks alive for the central bank and the economy it stewards.

Even if those threats persist, economists believe the bar to any future interest rate move is likely to be higher than the one in place for the first three cuts. The chair, Jerome H. Powell, has often compared the current cuts to two insurance adjustment cycles in the 1990s. In each instance, the Fed lowered rates protectively three times before pausing as threats faded from view and the economy steadied itself.

“I do look at this as akin to those two instances in the ’90s when the Fed cut and then cut again and then cut a third time,” Mr. Powell said this month, speaking in a question-and-answer session in Denver. “The economy took that accommodation on board and gathered steam again, and the expansion continued. So that’s the spirit in which we’re doing this.”

The policy-setting Federal Open Market Committee is set to release its interest rate decision and statement at 2 p.m., and Mr. Powell will hold a news conference at 2:30 p.m.

Mr. Powell could use his appearance to suggest that the central bank, which has been pledging to “act as appropriate” to sustain the expansion, now plans to follow that 1990s template — taking a break after October, and waiting to see whether economic data come in soft enough to merit further action.

“I think he’ll try to differentiate what the Fed has been doing from the next stage, which will be more data-dependent,” said Michelle Meyer, United States economist at Bank of America. “He’ll have to elaborate on what exactly that means — what is ‘act as appropriate,’ at this point?”

Relatively few investors are betting on a fourth 2019 rate cut, though market pricing suggests many see another reduction by next summer.

Hints at a coming pause could usher in criticism from Mr. Trump, who has spent more than a year pressuring the politically independent central bank to more aggressively cut borrowing costs.

The president, who appointed Mr. Powell as chair, said last week on Twitter that the Fed would be “derelict in its duties” if it failed to lower rates further. He compared the central bank unfavorably to Germany, where the European Central Bank has recently cut rates deeper into negative territory. While Mr. Trump often repeats that complaint, economists and central bankers point out that Europe’s economy is experiencing a more severe slowdown than the United States, necessitating a monetary policy response.

Fed officials have said repeatedly that they ignore politics and set monetary policy based on the economic outlook.

Whatever Mr. Powell and his colleagues signal about future monetary policy, it is likely to be vague enough to leave options open. The Fed’s final 2019 meeting is December 10-11, giving officials a month and a half of economic data and geopolitical developments to parse before they have to make another decision.

“There are very good reasons for them to start to shift into a ‘let’s wait and see’ mode,” said Jay Bryson, the acting chief economist at Wells Fargo.

There are signs of continuing strength and optimism: Gross domestic product growth is slowing but remains near its potential, and consumers continue to spend. The housing market has stabilized recently, helped in part by lower mortgage rates. Stock indexes are touching new highs.

But there are also risks, including Mr. Trump’s trade fight, which is likely to continue even if the United States signs a limited deal with China.

Policymakers have been divided over the timing and necessity of rate cuts as real data and risks to the outlook painted conflicting pictures. The Fed’s decision to lower borrowing costs last month drew three dissents, the most of Mr. Powell’s tenure. Two officials wanted to leave policy unchanged unless economic data showed a more marked deterioration, while the third — James Bullard, the president of the Federal Reserve Bank of St. Louis — wanted a sharper reduction.

Yet as of September, not one Fed policymaker expected more than three rate cuts in 2019, based on quarterly economic projections released after the meeting. Those are only best-guess estimates, though, and Mr. Powell indicated that more drastic action remained possible if needed.

“There will come a time, I suspect, when we think we’ve done enough,” Mr. Powell said at his September news conference. “But there may also come a time when the economy worsens, and we would then have to cut more aggressively.”

Beyond providing updates on how the rate outlook is shaping up, the Fed could provide additional details on its asset-buying plans. The central bank announced this month that it would begin buying Treasury bills, expanding its balance sheet holdings for the first time since the aftermath of the financial crisis.

The move is an effort to ensure that the banking system has ample reserves — currency deposits at the central bank — which keeps market plumbing working smoothly. It came after an obscure but important set of money market interest rates temporarily spiked in September.

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