CB Views: September 2025 FOMC Preview

Scenario 

Probability 

Assessment

Hawkish Cut (-25bp)

45%

• Chair Powell presser sounds neutral, where he highlights jobs market risks driving the path restarting towards neutral, but that the FOMC won’t allow inflation to take hold as a trade-off
• SEP dot estimates stay at 2 cuts in 2025 (assuming they cut 25bp at this FOMC, leaving only one more cut in 2025)
• Market Implication: Bear flatten, DXY rally & risk-off reaction

Dovish Cut (-25bp)
Base-Case

50%

• SEP dot estimates move to 3 cuts in 2025 but keeps 2 cuts in 2026 (this still keeps Fed dots above market forward rates)
• The only real difference between hawkish and dovish cut will come down to SEP dots and if the U/R expectation is higher
• Market Implication: Still a disappointment for all markets

Uber Dovish Cut (-50bp)

5%

• We doubt the Fed wants to restart easing with a 50bps cut as they did this time last year. The conditions are different now. Inflation has stalled and some effects of tariffs on prices has emerged. The Fed doesn’t want to be seen as panicking. That said, like last year, they should have cut 25bps in July. So, for max effect, they could cut by 50bps to show they mean business when addressing labor market weakness. If they cut 50bps, we expect them to show 2 more in the 2025 dots.
• Market Implication: Front-end flies, major large risk asset rally