:max_bytes(150000):strip_icc()/GettyImages-22270774181-3677d9af0b54479f82548ff5033e0228.jpg "The Federal Reserve Meeting Starts Today—What You Need to Know")
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Key Takeaways
- The Federal Reserve’s two-day policy-setting meeting begins Tuesday.
- Investors widely expect the central bank to cut its influential interest rate.
- However, members of the policy committee may divided on the decision and the course of monetary policy to come.
The Federal Reserve enters a pivotal meeting on Tuesday, where it’s widely expected to cut interest rates for the first time since December.
What the Fed signals about whether more cuts are coming will drive markets on Wednesday afternoon, when the Federal Open Market Committee will wrap up its two-day meeting. The FOMC appears divided on the path ahead, all while President Donald Trump continues exerting pressure for it to cut rates.
Lower rates would make it cheaper for households and businesses to borrow, helping to sustain spending and supporting a seemingly faltering labor market. The risk is that overdoing rate cuts could rekindle inflation, just as tariffs put upward pressure on prices.
Fed Chair Jerome Powell is due to take questions from reporters at 2:30 p.m. ET. Powell could face a “challenging press conference” as he tries to summarize the FOMC’s debate, Deutsche Bank Chief U.S. Economist Matthew Luzzetti wrote in a research note.
Will It Be 25 or 50?
Given the sluggish job report from August, markets anticipate a rate cut, but one lingering question is how big.
The Fed is likely to stick with its usual playbook of making small moves of 0.25% at a time, which would lower its benchmark rate to a range of 4% to 4.25%. There’s a slight chance that the Fed could surprise markets and opt for a more aggressive 50-point cut, lowering rates to between 3.75% to 4%.
August’s weak jobs gains sparked market talk of a larger cut, though the odds have dropped as the FOMC meeting approaches and now appear to be close to zero.
A smaller cut “seems all but a given,” Richard Moody, chief economist at Regions Financial, wrote in a research note. But there is “plenty of intrigue around the rest of the meeting,” Moody wrote.
What’s the Lineup?
Part of the intrigue is the roster of FOMC voters on Wednesday.
The Senate voted on Monday to confirm Trump’s newest appointee to the Fed: Stephen Miran, a top White House economist. He will have “just enough time to get his Fed ID badge, figure out where the restrooms are, and cast his vote,” Ian Katz, a policy analyst at Capital Alpha Partners, wrote in a note to clients before the confirmation.
It will be the “strangest FOMC meeting ever,” Katz added, considering Trump’s ongoing legal fight to oust Fed Governor Lisa Cook.
Trump attempted to fire her for allegedly falsifying mortgage documents, but a federal judge blocked her firing last week. An appeals court ruled against Trump late on Monday.
How Many Voters Will Dissent?
While analysts don’t expect a 50-basis-point cut, they do anticipate the Fed debating the possibility and perhaps a couple of dissenting votes at the FOMC.
Two Trump appointees to the Fed, Governors Christopher Waller and Michelle Bowman, could vote for a more aggressive cut. The two dissented at the Fed’s last meeting and could do so again on Wednesday, Deutsche Bank’s Luzzetti wrote.
Assuming Miran follows suit, it could lead to an unusually divided FOMC meeting.
“If these three Governors dissent, it would be the first meeting with three dissents from the Board of Governors since 1988,” Luzzetti wrote.
There’s also a possibility that a couple of Fed officials could vote to keep interest rates unchanged, further dividing the FOMC.
What Will the Dots Show?
The FOMC split will also likely play itself out in the “dot plot,” which shows Fed officials’ forecasts for where they think their benchmark rate should be in the coming years.
The dots could reveal whether officials are leaning toward cutting rates in October and December, the FOMC’s next two meetings. Fed officials will also update their dots for 2026, which would indicate how many more follow-up cuts they foresee.
Markets are pricing in a “substantial loosening,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote in a note to clients. Investors see 75 basis points in cuts by year-end and 75 more in 2026, Tombs wrote.
The FOMC is unlikely to “validate those expectations” through its forecasts, Tombs wrote, but it may lean more heavily in that direction as time goes on.
“Our view remains that a substantial easing cycle will be warranted incrementally by the mix of inflation and labor market data, rather than telegraphed by the FOMC in advance,” Tombs wrote.
