The September 2025 FOMC meeting is likely to result in the first interest rate cut of the year, as Jerome Powell is under pressure from both bad labour market data and political calls for easing.
The two-day meeting of the US Federal Open Market Committee (FOMC) scheduled for September 16-17 is underway. The decision of US Fed Chair Jerome Powell will be announced on September 17 at 2 p.m. ET (11.30 p.m. IST), along with a review of economic projections. The September FOMC meeting can be watched on the Federal Reserve’s official YouTube channel.
Jerome Powell, the chairman of the US Federal Reserve, is expected to announce what may be the first interest rate cut in 2025. At least, this is what the market anticipates.
But will Powell pull the trigger? “Cooling job growth and elevated but somewhat contained inflation have provided a compelling case for the Fed to pull the trigger tomorrow,” says Aaron Hill, FP Chief Analyst from FP Markets.
The FOMC last trimmed interest rates in December 2024 by 50 basis points. Since then, rates have remained constant at a range of 4.25%-4.5%, owing to concerns that Trump’s tariffs may cause inflation.
Miran’s Appointment
In what could appear to be a threat to the US Fed’s independence, Stephen Miran was confirmed by the Senate to the Federal Reserve, one day before the central bank’s meeting on interest rates. Miran is currently chair of the White House Council of Economic Advisors and has not yet resigned and will also participate in the FOMC meeting in September.
Meanwhile, a US appeals court rejected Trump’s eleventh-hour bid to oust Lisa Cook as a Fed governor. Lisa Cook will stay at Federal Reserve.
Pressure to Cut Rate Mounts
Powell is under pressure to cut rates. Trump has been calling for a rate cut for many months now. Now, he is gunning for a larger rate cut, of at least 50 bps in the September FOMC meeting.
The job market is also throwing up numbers that require some immediate action by the US Fed. A weakness in the job market may spill over to other sectors of the economy, pushing the US into a recession.
Catch 22 Situation
A rate cut to salvage the economy because of the falling job market at a time when inflation is not fully under control may have negative implications. Powell is aware of this, and, therefore, it could be a tough decision to go for a larger rate cut.
The market expects a 25bps rate cut today in the FOMC meeting.
Rania Gule, Senior Market Analyst at XS.com, says, “Looking ahead, a 25bps rate cut in September would be a measured move, but it would not change the reality of a weakening labor market. A 50bps cut, however, would signal distress and be read by markets as an admission of a deeper crisis. Such a scenario could push Nasdaq to new highs, but these would likely be short-lived, followed by sharp pullbacks once the markets fully price in the slowdown.”
The dot plot is also getting released today, and the market is also anticipating signals from Powell’s press conference regarding the direction of interest rates.