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Federal Reserve wrestles with how many interest rate cuts to make and how fast
With the Federal Reserve widely expected Wednesday to reduce its key interest rate by a quarter-point to about 4.1%, economists and Wall Street investors will be looking for signals about next steps: How deeply might the Fed cut in the next few months? There are typically two different approaches the central bank takes to lowering borrowing costs: Either a measured pace that reflects a modest adjustment to its key rate, or a much more rapid set of cuts as the economy deteriorates in an often-doomed effort to stave off recession. For now, most economists expect it will take the first approach: What many analysts call ... (full story)
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Sep 17, 2025 7:11am
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Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 4‑1/4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. FOMC STATEMENT COMPARE: pic.twitter.com/6gTcajtaKz One dissenter: Voting against this action was Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting. FED SAYS DOWNSIDE RISKS TO EMPLOYMENT HAVE RISEN
Wednesday will see the Fed deliver an interest rate cut, most likely 25bp. It's fully priced. So, material market impact would have to come from either a surprise 50bp cut, or commentary from Chair Powell that swings dramatically in either a decidedly hawkish or dovish direction. A 25bp cut gives room for a somewhat dovish leaning, while a 50bp cut would ...
The September 2025 FOMC meeting will conclude on Wednesday, September 16 at 2:00 ET. Fed Chairman Powell’s press conference will begin at 2:30 ET. As of writing, Fed Funds futures traders are pricing in 96% odds of a 25bps interest rate cut per CME FedWatch (with an outside chance of a 50bps “double” rate cut). Assuming the Federal Reserve cuts interest ...
