Fed Kicks Off Two-Day Policy Meeting, Markets Brace for Rate Cut

WASHINGTON, Sept. 16 (Reuters) - The Federal Open Market Committee (FOMC) convened today in Washington, D.C., for its September policy meeting, where officials are widely expected to approve a 25-basis-point reduction in the federal funds rate, the first cut since December 2024.

The meeting unfolds against a backdrop of slowing job growth and elevated inflation, with investors and analysts closely watching for guidance on the pace and timing of future rate reductions.

Meeting Kicks Off Amid Cut Expectations

  • The FOMC begins its two-day session today, concluding Wednesday with a policy announcement at 2 p.m. ET followed by Chair Jerome Powell’s press conference at 2:30 p.m.
  • Market pricing implies a 93-96% probability of a quarter-point cut to bring the target range to 4.00%-4.25%, with only a small chance of a 50-basis-point move.

Political Backdrop and Fed Independence

  • President Donald Trump has publicly urged a “larger” rate cut, intensifying scrutiny on Fed independence and highlighting recent board nominations and legal skirmishes.
  • The arrival of newly confirmed governor Stephen Miran and the unresolved status of Lisa Cook add uncertainty to committee votes and underscore concerns about political influence over monetary policy.

Market Reaction and Economic Projections

  • U.S. Treasury yields held near recent lows ahead of the decision, and the dollar slid to multi-month lows on firm expectations of easing.
  • Attention will focus on the Fed’s Summary of Economic Projections (“dot plot”) for signals on additional cuts in October and December, and on updated forecasts for inflation, growth, and unemployment.

What to Watch Tomorrow

  • Policy Statement: Changes to the opening paragraph to reflect softer labor conditions and potential inflation risks.
  • Dot Plot: Median projections for year-end rates and the number of anticipated cuts in 2025 and beyond.
  • Press Conference: Chair Powell’s tone on data dependency and the balance between supporting growth and containing inflation.

The outcome of this meeting will set the tone for U.S. monetary policy heading into year-end, with implications for markets, borrowing costs, and economic growth.