The Federal Open Market Committee (FOMC) is expected to lower interest rates by 25 basis points. There is interest in dissenting opinions, especially from dovish members like Miran, Bowman, and Waller, who might push for a larger cut of 50 basis points. Kansas City Fed President Schmid may argue to keep rates the same, citing concerns about inflation. On the other hand, Powell, Barr, Jefferson, Cook, Williams, Goolsbee, and Musalem are likely to support the 25 basis point cut.

Market Signals and Dissents

Markets will carefully watch the views of dissenting members to gauge hints about future rate decisions. If more members join Miran, Bowman, and Waller in calling for a bigger cut, it could signal a shift toward a dovish approach. The dot plots will also be examined closely. Changes in projections are expected due to Miran’s influence. The previous median projection for 2025 was 3.9%, and this may change as more members begin to anticipate rate cuts this year. Attention will be on how many members expect one cut versus two or more by the end of the year. Projections for 2026 and 2027 are likely to show lower rates, possibly around 3% for 2027, reflecting a recent dovish trend.

Fed Pathways and Economic Context

As of today, September 17, 2025, the market almost fully expects a 25 basis point rate cut from the Federal Reserve this afternoon. For derivative traders, the main interest lies not in the cut itself but in the details that will outline the Fed’s direction for the rest of the year. We should prepare for possible fluctuations based on dissenters and updated economic forecasts. The backdrop for this meeting is an economy that has noticeably weakened compared to previous years. The latest job figures from August show payrolls increasing by only 150,000, while the unemployment rate rose to 4.1%. This contrasts sharply with the tight labor market seen in 2024. With the most recent CPI inflation rate at 2.8%, the stage is set for the Fed to continue easing. If more than three members dissent for a larger cut of 50 basis points, it would send a clear dovish signal. This outcome could lead to a rally in interest rate futures, as markets would quickly factor in a higher chance of another cut in December, which is currently viewed as only a 30% possibility. It would also likely weaken the US dollar against other major currencies. Conversely, a hawkish surprise could arise if Kansas City Fed President Schmid dissents in favor of holding rates steady. Since this is unexpected, such a move could disrupt the market’s easing outlook and cause a quick, short-term spike in the dollar. Traders with long positions in equities might then consider purchasing short-term put options on the SPX as a safeguard. Beyond the vote, the dot plot is the next significant factor to watch. We’ll be looking to see if the median projection for the end of 2025 reveals at least one more rate cut after today. Historically, surprises in the dot plot, like the hawkish shift in mid-2023, have led to sharp movements in bond yields. Ultimately, the mix of dissenting opinions and the dot plot will shape trading strategies in the upcoming weeks. A surprisingly dovish outcome, with more dissenters and a lower median rate projection, would strengthen expectations for a weakening dollar and lower bond yields heading into the fourth quarter. However, a result that aligns with expectations may cause implied volatility to decrease as a major event risk passes. Create your live VT Markets account and start trading now.

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