The FOMC meeting is being held today, and the rate decision will be announced at 8.00pm CET tonight. We expect a 25bps rate cut, together with a new summary of economic projections (SEP) which should have dovish tilt.

The US economy is doing fine, with US real GDP growth on track to come in around +1.5% YoY for 2025e, a slowdown versus +2.8% in 2024a. According to the Atlanta Fed GDPNow indicator, Q3 growth is annualizing at +3.4% (as of 16 September), which is very robust. We still expect a re-acceleration in US growth in 2026. At the same time, US inflation remains in check with very minimal impact from Trump’s new tariff policy so far – US core CPI for August came in at +3.1% YoY (versus +3.2% at the end of 2024). While inflation remains above the FED’s 2.0% mid-term target, there is growing pressure on the Fed to normalize its current restrictive monetary policy towards a neutral stance.

It will be interesting to see whether Powell signals openness today towards a 25bps rate cut in each of the next 3 FOMC meetings left in 2024, which would bring policy back to the neutral rate of around 3.5%.

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