When It Is In September and What To Expect

As the next meeting of the Federal Open Markets Committee approaches, investors, economists, and policymakers are trying to predict how the central bankers will react to a weakening labor market and stubborn unemployment.

What to Expect From the September Meeting

Fed watchers expect the central bank’s policy committee to cut its influential federal funds rate for the first time since December.

Traders are pricing in a 93% chance that central bankers will cut the rate by a quarter of a point, to 4%-4.25%, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. They’re predicting an outside chance of a half-point cut.

The bankers are also set to release their survey of economic projections, which shows where members of the committee expect the economy to be in the short- and long-term.

Another variable in this month’s meeting is who will be voting. President Donald Trump has appealed a court ruling that would allow Governor Lisa Cook to have her say next week, while senators have yet to approve Stephen Miran to fill an empty seat on the committee. Both decisions could come as late as Monday.

What Are the Fed’s Major Considerations?

Congress tasked the Fed with two key directives: keep employment high and inflation low.

How is employment? The job market has become an increasing concern for central bankers over the last two months. Job growth is waning, and the unemployment level has ticked up.

What about inflation? Inflation has remained stubbornly above the Fed’s 2% annual goal since March 2021. In fact, the Fed’s preferred inflation measure has risen over the last three months.

There are also other factors. Trump has been needling the Fed to dramatically lower rates and has threatened and criticized individual committee members, particularly Chair Jerome Powell.

What Happened at the Last Fed Meeting?

The Fed’s policy committee voted to keep the central bank’s key fed funds rate unchanged for the fifth meeting in a row. Two members dissented from the interest rate decision for the first time this year and voted to cut rates by a quarter of a point.

Fed officials said they were holding the rate steady at a higher-than-usual level to try to tamp down on stubborn inflation and voiced concerns that Trump’s tariffs could exacerbate the issue.

How Does the Federal Reserve Work?

The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System, the United States’s central bank. It holds eight regularly scheduled closed meetings each year.

The FOMC consists of 12 members: the seven board governors, the Federal Reserve Bank of New York president, and four other regional bank presidents who serve rotating one-year terms.

At each FOMC meeting, the committee members discuss economic and financial conditions and make decisions about monetary policy based on the dual mandate of keeping employment high and inflation low. The FOMC issues a public statement about its decisions after each meeting and the chair typically hosts a press conference to discuss the decision further after each meeting.

 The FOMC also publishes the Summary of Economic Projections (SEP) once per quarter. The document depicts the members’ economic forecasts and their views on the appropriate federal funds rate path ahead.