Federal Reserve to announce policy decision on September 17; all you need to know

The Federal Reserve policy meeting will start on September 16, and the policy decision is expected to be announced on September 17 at 11:30 pm (IST) . The Federal Reserve is widely expected to cut the interest rate by 25 basis points after nine months of cutting the interest rate in 2024. The meeting is widely tracked as the President continuously bashed the Federal Reserve governor on cutting interest rates. However, the recent unemployment data shows intensified weakness in the labour market, which could prompt the Federal Reserve to cut interest rates this time, despite the inflation above the target range.

The fed funds futures rate has factored in a 25 basis point rate cut with 96% probability. Controlling the rising food prices and maintaining the labour market situation is a walk on a tight rope for the central bank. Furthermore, the central bank also navigates through the challenges created by tariffs, which is expected to increase inflation in the coming months.

The US markets are hitting new record highs daily, amid high optimism around Artificial Intelligence and its ecosystem. Market participants see the rally to continue even further post the rate cuts, as it could inject fresh liquidity into the market. With the 25 basis points rate cut on the horizon, the commentary by Federal Reserve governor Jerome Powell will be closely watched. In addition, a larger cut in the interest rates in the September meeting could highlight recessionary fears in the economy, prompting the central bank to go aggressive on rate cuts.

In addition, analysts and market experts are divided on how many more rate cuts will be followed in 2025. The fed funds futures market is betting on three rate cuts in 2025.

According to experts, the US interest rate cuts are coinciding with record high levels of markets that have only been visible three times in history. Previously, such an occurrence has resulted in double-digit returns in the coming 12 months, aiding investor optimism around the markets.