The US Federal Open Market Committee (FOMC) is holding its two-day meeting on September 16-17, 2025, with the outcome to be announced on September 17 at 2 p.m. ET, which is 11:30 p.m. Indian Standard Time (IST). The decision, along with a review of economic projections, will be closely watched by investors, economists, and policymakers alike. You can watch the September FOMC meeting on the Federal Reserve's official YouTube channel.

Expectations for the Meeting

Market participants widely anticipate that the Fed will cut interest rates for the first time since December 2024. The likelihood of a 0.25% rate cut is priced in at 96%. This would lower the key federal funds rate to a target range of 4.00% to 4.25%. There is also a small possibility of a larger, 0.50% rate cut.

The Fed's Summary of Economic Projections (SEP), also known as the "dot plot," will be released, providing insights into each member's expectations for monetary policy going forward. The dot plot will indicate how much more easing individuals project this year, with two meetings remaining in October and December.

Factors Influencing the Decision

Several factors are expected to influence the Fed's decision:

• Weakening Labor Market: Recent data indicates a cooling job market, with the US economy generating fewer jobs than previously estimated. The unemployment rate rose to 4.3% in August, up from 4.2% in July.
• Persistent Inflation: While the labor market is weakening, inflation remains above the Fed's 2% target. The US Consumer Price Index (CPI) increased by 2.9% in August.
• Political Pressure: President Trump has been putting pressure on the Fed to cut rates more aggressively.
• Global Economic Slowdown: Concerns about a global economic slowdown add to the pressure on the Fed to act.

Potential Implications

A rate cut is intended to make it cheaper for households and businesses to borrow money, which could help to sustain spending and support the labor market. However, cutting rates when inflation is not fully under control could have negative consequences.

• Indian Stock Market: Some experts believe that a 0.25% rate cut may already be priced into the Indian stock market. A larger rate cut of 0.50% or more could boost the Indian market.
• US Indices: A dovish signal from the Fed would likely be positive for equities, while a hawkish signal could trigger a pullback in US indices.

Dissenting Opinions

There could be dissenting opinions among FOMC members regarding the appropriate course of action. Some members may favor a larger rate cut to address the weakening labor market, while others may be more concerned about the risk of inflation.

Newly Appointed Governor

Stephen Miran, a former Trump advisor, was recently sworn in as a governor of the Federal Reserve and will be a voting member of the FOMC. It remains to be seen whether he will align with Trump's calls for steeper rate cuts.