Fed Launches Two-Day FOMC Meeting Amid Rate-Cut Expectations

Lead: The Federal Open Market Committee convened in Washington on September 16 for a two-day policy meeting, where officials weigh their first interest-rate reduction since December 2024 amid cooling labor conditions and persistent inflation.

Nut Graf: With markets fully pricing in a quarter-point cut to 4.00%-4.25% when the Committee announces its decision tomorrow, investors and consumers alike are bracing for guidance on the Fed’s strategy to balance slowing job growth against inflation remaining above the 2% target.

Meeting Kickoff and Participants

• The FOMC’s September meeting began at the Eccles Building, marking the sixth gathering of 2025.
• Chair Jerome Powell presided alongside eleven voting members, including newly confirmed regional presidents and incoming nominee Stephen Miran.
• Policymakers will release their policy statement at 2:00 pm ET on September 17, followed by Powell’s press conference at 2:30 pm ET.

Economic Backdrop Drives Debate

• Labor Market Softening: August payrolls rose by just 22,000, and the unemployment rate ticked up to 4.3%, supporting calls for easier policy.
• Inflation Dynamics: Headline CPI held at 2.9% year-over-year, with core inflation near 3.1%, underscoring sticky price pressures even as some disinflation gains emerge.
• Tariff Risks: Ongoing uncertainties from tariffs have contributed to elevated consumer prices, prompting cautious language among hawkish members.

Markets Brace for Rate Cut

• CME FedWatch shows a 96% probability of a 25-basis-point cut and only a 4% chance of a 50-basis-point move.
• Treasury yields fell and equities rallied in anticipation, while the dollar weakened to a nearly week-low ahead of tomorrow’s announcement.

Political and Policy Stakes

• President Trump’s renewed calls for a “larger” cut added pressure, though the Fed reaffirmed its independence and data-driven approach.
• The Committee’s Summary of Economic Projections and updated “dot plot” will reveal the median outlook for future cuts, with markets watching for signals on October and December meetings.

What to Watch Next

• Policy Statement: Tone on labor versus inflation risks in the opening paragraph.
• Economic Projections: Number and timing of rate cuts in the dot plot.
• Dissent Votes: Any hawkish or dovish dissents, particularly from regional presidents.
• Press Conference: Chair Powell’s framing of trade-off between employment support and price stability.

The outcome of tomorrow’s rate decision will set the course for U.S. monetary policy through year-end and shape borrowing costs for households and businesses heading into 2026.