FOMC Meeting: Key Takeaways

September FOMC meeting | September 17, 2025

The Federal Open Market Committee (FOMC or the Committee) reduced the federal funds rate by 25 basis points (100 basis points equal 1%) to 4.00% – 4.25%, restarting an interest-rate-cutting cycle that has been on pause since December 2024. The FOMC stated that uncertainty about the economic outlook remains elevated and that downside risks to employment have risen. The Federal Reserve (Fed) will continue with the pace of decline of its securities holdings, $5 billion of U.S. Treasury securities and $35 billion on agency mortgage-backed securities each month.

• Recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate has edged up as job gains have slowed. Inflation remains somewhat elevated.
• In support of its goals, the Committee lowered the target range for the federal funds rate by 25 basis points to 4.00%-4.25%. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate (price stability and full employment) but downside risks to employment have risen.

• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.
• The Committee will continue to take into account a wide range of information including readings on labor market conditions, inflation pressures, inflation expectations, and financial and international developments.

• A cut to the federal funds rate at today’s meeting was expected by markets. There was one Fed governor that dissented: Stephen Miran, who would have preferred to lower the rate by 0.50%. Still, in our view, the majority of FOMC members still see risks of inflation moving higher ahead of full tariffs kicking in. The FOMC also raised its median gross domestic product forecasts for 2025 and 2026 by 0.2% each while lowering its unemployment projection by 0.1% for 2026 and leaving it the same for 2025.
• We believe the Fed will continue to deliver further cuts into early 2026 as an economic slowdown materializes and if inflation allows. Our expectation for two more rate cuts in 2025 is within the Fed’s current view, but the median expectation of Fed officials was for only one additional cut in 2026. There continues to be considerable disagreement from individual members on the appropriate target range for rates.
• The threat of having both inflation and unemployment rising simultaneously continues to create a big headache for the Fed’s interest rate policy. While the Fed is poised to continue rate cuts, there is a possibility that tariff inflation concerns force an early end to the cutting cycle. Under this level of uncertainty, we believe fixed-income investors may benefit from being exposed to the intermediate portion of the curve (3-7 year maturities), striking the best balance between attractive yield and less sensitivity to potential interest rate risk.

• October 29 | December 10*
  

  *Indicates the meeting is associated with a summary of economic projections. In addition, every meeting will be accompanied by a press conference.

Forecasts and targets are based on certain assumptions and on views of market and economic conditions which are subject to change.

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