Federal Reserve Interest Rate Decision: September 17, 2025 Preview
The Federal Open Market Committee (FOMC) is set to announce its latest monetary policy decision on Wednesday, September 17, 2025, at 2:00 PM ET, capping a two-day meeting that began on September 16. This gathering is poised to be one of the year’s most pivotal, marking the first potential rate adjustment in nine months amid a cooling labor market, persistent inflation pressures, and heightened political scrutiny. While the decision itself is largely anticipated, the accompanying Summary of Economic Projections (SEP)—including the influential “dot plot” of future rate expectations—and Chair Jerome Powell’s 2:30 PM press conference will provide critical insights into the Fed’s path forward. Below is a comprehensive preview based on the latest economic data, market pricing, and expert analysis.
Current Context: A Steady Rate Amid Shifting Winds
The federal funds target range has remained unchanged at 4.25%-4.50% since the Fed’s last cut on December 18, 2024—a 25 basis point (bp) reduction from 4.50%-4.75%. This pause followed five consecutive holds in 2025 (January, March, May, June, and July), as policymakers weighed stubbornly elevated inflation against signs of economic softening. The Fed’s dual mandate—maximum employment and 2% inflation—faces crosswinds: Inflation has ticked up recently, but labor market weakness has intensified calls for easing.
Key recent indicators influencing the decision:
- Inflation: August CPI rose to 2.9% year-over-year (from 2.7% in July), with core PCE (the Fed’s preferred gauge) hovering around 3%—well above the 2% target. Tariffs introduced earlier in 2025 have contributed to this uptick, prompting concerns about sustained price pressures.
- Labor Market: July’s nonfarm payrolls added just 114,000 jobs (below expectations), pushing unemployment to 4.2%. Jobless claims have risen, signaling “losing steam” in hiring.
- Growth: Q2 GDP expanded at 3.0%, but revisions to earlier jobs data and softening consumer spending suggest deceleration.
These dynamics have shifted focus from inflation restraint to supporting employment, with the Fed acknowledging tariff-related risks but prioritizing data-driven policy.
Meeting Schedule and Key Outputs
The FOMC holds eight meetings annually, with this one including the quarterly SEP. Here’s the 2025 lineup for context:
| Date | Meeting Type | Key Notes |
|---|---|---|
| January 28-29 | Regular | Held steady |
| March 18-19 | SEP Included | Held steady |
| May 6-7 | Regular | Held steady |
| June 17-18 | SEP Included | Held steady |
| September 16-17 | SEP Included | Upcoming: Rate decision, dot plot, Powell presser |
| October 29-30 | Regular | Next potential cut |
| December 9-10 | SEP Included | Year-end projections |
Post-meeting, minutes will be released three weeks later (October 8, 2025). The committee’s composition includes seven governors, the New York Fed president, and four rotating regional presidents—recently updated with new Governor Stephen Miran sworn in on September 16.
Market Expectations: A Cut Is Locked In, But Pace Matters
Traders are overwhelmingly betting on easing, per the CME FedWatch Tool (based on 30-day fed funds futures):
- September: 96% probability of a 25 bp cut (to 4.00%-4.25%); just 4% chance of a 50 bp “jumbo” cut.
- October: ~70% chance of another 25 bp cut.
- December: Markets price in three total cuts for 2025 (75 bp total), bringing the year-end range to ~3.50%-3.75% (67.6% probability). This implies a terminal rate of 3.25%-3.50% by Q1 2026.
| Meeting | Expected Target Range | Probability of 25 bp Cut | Cumulative Cuts from Now |
|---|---|---|---|
| Sep 17 | 4.00%-4.25% | 96% | 25 bp |
| Oct 29 | 3.75%-4.00% | 70% | 50 bp |
| Dec 10 | 3.50%-3.75% | 65% | 75 bp |
Economists are slightly more cautious: A Reuters poll shows 100% expecting a September cut, with 60% forecasting 50 bp total easing by year-end and 37% at 75 bp. The June dot plot projected two cuts (to 3.90%) by December, but updated projections could signal acceleration if labor data worsens.
Potential Scenarios and Risks
- Base Case (High Confidence): 25 bp cut, with Powell emphasizing data-dependence. Dot plot shows 2-3 cuts for 2025. Markets rally mildly; stocks up 0.5-1%, yields dip.
- Hawkish Surprise (Low Probability): Hold or signal fewer cuts due to inflation/tariffs. Could spark volatility, with 10-year Treasury yields rising 5-10 bp.
- Dovish Tilt (Medium Probability): 50 bp cut or explicit October guidance, driven by jobs weakness. Boosts equities (S&P 500 +2%), but risks inflating asset bubbles.
Dissents are likely: New Governor Miran (a Trump appointee and rate-cut advocate) may push for deeper easing, potentially marking the first three-way split since 2019. President Trump has publicly urged aggressive cuts, but Powell has reaffirmed the Fed’s independence.
Broader Implications
- Borrowers: Variable-rate debt (credit cards, adjustable mortgages) could see relief, though one cut won’t slash bills dramatically. Fixed-rate products like 30-year mortgages (near 7%) may ease gradually.
- Savers: High-yield savings/CD rates (currently 4-5%) will decline; lock in now via CDs.
- Markets: Equities favor cuts for growth; bonds benefit from lower yields. Watch for tariff impacts on inflation forecasts.
- Global Ripple: Easing could strengthen the USD short-term but support emerging markets long-term.
The Fed’s move underscores a pivot toward employment amid “unprecedented” conditions like tariffs. For live updates, tune into Powell’s presser—expect measured tones, but the dot plot could redefine 2025’s trajectory.