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*Fed Meeting Outlook – September 16‑17 2025**
The market’s focus is whether the Federal Reserve will trim rates. Given the latest data, a 0.25 % cut at the September meeting is the most likely outcome, though the final decision hinges on the economic releases that arrive before the FOMC convenes.
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### Current Rate Landscape
- **Policy rate:** 4.25 %–4.50 % since December 2024.
- **July 30 meeting:** Rates held; five consecutive meetings with no change.
- **Market expectation shift:** After the July jobs report, the probability of a cut rose from 37 % to over 80 % (CME FedWatch).
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### Economic Indicators
| Indicator | June 2025 | July 2025 |
|-----------|-----------|-----------|
| Inflation (YoY) | 2.4 % | 2.7 % |
| Core Inflation | – | 2.9 % |
| Unemployment Rate | 4.1 % | 4.2 % |
| Job Growth (revised) | – | –258 k |
- **Inflation:** Still above the 2 % target; core inflation at 2.9 %.
- **Labor market:** Cooling—unemployment edged up, job gains revised downward.
- **Tariffs:** Average U.S. tariff rate ~18.4 % in July, feeding higher prices.
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### Fed Internal Dynamics
- **July vote:** Governors Michelle Bowman and Christopher Waller favored a 0.25 % cut; the first such split since 1993.
- **Chair Powell:** Stressed no decision yet, urged more data, balanced risk of premature cuts (inflation rebound) against delayed cuts (job market harm).
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### Tariff Impact
- **Price pressure:** Tariffs have raised import costs; the Fed views many tariff‑related price hikes as temporary.
- **Business confidence:** Uncertainty over future tariff policy dampens investment decisions, a key consideration for the Fed.
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### Growth & Consumer Spending
- **Q2 2025 GDP:** 3.0 % growth, largely driven by trade and lower imports, not domestic demand.
- **Domestic final sales:** 1.2 % rise (slowest since late 2022).
- **Consumer spending:** 1.4 % growth, constrained by higher rates and persistent inflation.
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### Market Sentiment
- **Dollar & Treasury yields:** Strengthened after Powell’s cautious remarks; later weakened following the weak jobs report.
- **Wall Street forecasts:**
- **Goldman Sachs:** Three cuts in 2025, federal funds rate projected 3.0 %–3.25 % by year‑end.
- **BlackRock (Rick Rieder):** Possible 0.50 % cut in September if labor market weakens further.
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### Global Implications
- **Foreign central banks:** Many have already begun cutting rates; Fed moves will influence their pace.
- **Dollar strength:** A Fed rate cut could soften the dollar, affecting emerging markets and global trade.
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### Uncertainty & Forecasts
- **Economic Policy Uncertainty Index:** 243.7 in July 2025, indicating high planning difficulty.
- **FOMC projections:** Participants hold divergent views on future rate paths.
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### Job & Inflation Outlook
- **Job openings & turnover:** Fewer openings, lower hiring rates.
- **Core inflation trajectory:** Cleveland Fed models forecast a rise to 2.9 % by August 2025, suggesting persistent price pressure.
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### September 2025 Prediction
- **Probability:** ~80 % chance of a 0.25 % cut.
- **Key determinants:** Job market health, inflation persistence, tariff effects, and new data releases.
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### Investment Considerations
- **Real estate:** Rate cuts could boost property returns; investors should secure cash‑flowing assets in stable markets.
- **Portfolio strategy:** Position now to benefit from potential rate reductions while hedging against volatility.
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