Guide to the FOMC statement and September SEP: Key takeaways and what to watch

[Ben Graham]

The most important day in a few trading months is coming up fast (two days left!).

The September FOMC rate decision is part of four quarterly meetings where key economic projections (SEP or Summary of Economic Projections) are published (don't forget the 4 other meetings). They take place in March, June, September and December.

These quarterly meetings tend to hold higher weight on potential changes to the FED's tone. With Wednesday's meeting in focus, markets are preparing for a change in tone and changing SEPs.

While the decision itself may not surprise (25 bps is heavily priced in and should be the basis except for any surprise), the details in the projections and Powell’s tone at the press conference will dictate the market reaction.

One good thing to do is to also follow any pre-FOMC post from Wall Street Journal's Nick Timiraos who re-guided wrongly priced markets during the 2022 hike cycle and is considered as an insider. The FED "leaks" their own info that way to avoid shaking markets too suddenly, with the US dollar's central role in the global economy – As a reminder, FED members cannot speak on the Economic or financial outlook two weeks before the FOMC meeting in what is called the "Blackout period".

Don't forget to also check out our freshly released Podcast with discussions on the upcoming FOMC.

(and Too Long, Didn't Read recap further down if needed).

Read More:

• British pound hits two-month high, UK job data next
• Markets Weekly Outlook - S&P 500, Nasdaq & Dow Jones on a Tear as Fed Rate Cut Looms

What to take from the previous meeting

At the previous meeting (July 30, 2025), Powell struck a balanced but cautious tone amid still high tariff uncertainty.

He acknowledged progress on disinflation but highlighted tariff-driven risks to the inflation outlook. His remarks left the door open to cuts later in the year, but the Fed emphasized it would remain data-dependent.

The June last SEP reflected this stance: inflation forecasts were nudged slightly lower, growth remained resilient, and the famous dot plot still suggested two cuts before year-end — a point markets have since debated heavily.

June 2025 SEP, source: Federal Reserve

What to watch in the September SEP

• Dot Plot: The median projection for rate cuts will be the market’s first checkpoint. A shift from two cuts to one would reinforce a hawkish narrative, while holding steady would keep the Fed aligned with current pricing.
  
• Inflation forecasts (Core PCE, PCE): Expect markets to scrutinize whether tariffs are raising the Fed’s inflation expectations. Any upward revision would challenge the softening CPI and PPI figures released this week and the change in tone from Powell's Jackson Hole speech. The inflation projections might be revised upward in 2025 and down in later year: Major key is to watch 2026 PCE projections and onwards to get a glimpse of 2026 cut pricing (currently 140 bps are priced in).
  
• Unemployment rate: A move higher would confirm the gradual softening already seen in recent jobs reports – A sudden rise in this could shift the pace of cuts priced in.

What was said in Powell's previous FOMC speech?

You can access Powell's July FOMC speech right here. I also invite you to balance these comments with what was said in his Jackson Hole speech (link available just above).

Through his July speech, Powell emphasized the FED's dual mandate (inflation and maximum employment) and could be expected to put an extra emphasis on the employment mandate with the Labor market data degrading.

He also emphasized a moderating economic activity with tariff uncertainty (uncertainty should be expected to get less mentions)

Reading Jerome Powell’s speech.

Markets know by now that Powell’s tone matters as much as the text. Expect sharp reactions to how he balances:

• Confidence in inflation trending lower vs. caution about tariff pass-through.
  
• Reassurance on labor market strength vs. acknowledgment of weakness in recent payrolls.
  
• Whether he hints at future financial stability concerns, particularly with equities and crypto markets surging.

Analysts tend to highlight the number of mentions for elements like: Employment/unemployment, inflation, tariffs etc to spot what the FED will focus on looking forward.

Market dynamics

Current state of Markets, September 15, 2025 – Source: TradingView

Bond yields have already been retreating, with the 2Y at its lowest since April’s “Liberation Day” trough. Don't forget to take a look at the 2-10s curve: Currently very steep due to higher short-term cut expectations but higher inflation (= higher long term rates)

Risk assets are at all-time highs, therefore the Markets hold high expectations for a dovish tone, watch out for disappointments !

FX markets remain rangebound, leaving the Dollar Index exposed to any surprises in the dot plot or Powell’s tone – One of the thesis I had been holding is the Seller's inability to reach new lows in a hesitant Dollar, but its reaction is still binary.

With high expectations of a dovish speech, Powell could balance out recent dovish pricing with a more hawkish stance which would strengthen the US Dollar and hurt Equities a bit.

TLDR conclusion: What to focus on for the upcoming FOMC

TL,DR:

• For now a bit less than 75 bps priced in through 25 bps at every meeting.
• SEP: Particularly expected Fed Funds rate in end 2025 and 2026 (Neutral rate should be priced in until then for now) and Core PCE projections.
• More or less mentions of tariffs: Any hints of one time price hikes could bring more cuts in the future. More mentions of uncertainty = less hikes in 2026.
• Labor market and unemployment rate: If see more mentions of degrading employment, it could add more rate cuts more suddenly – Particularly if the FED balances out its dual mandate more towards employment.
• Any hawkishness to balance out the most recent dovish comments and give back some credibility to the FED's independence

Safe trades and a successful FOMC week!

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