Fed Watch – 9/17/2025

with lauren saidel-baker

WEEKLY FED WATCH

Lauren Saidel-Baker brings you a special midweek bonus episode following the Federal Reserve’s decision to cut interest rates by 25 basis points. While some expected a deeper cut, the real story lies in the Fed’s next moves. Diverging views in the Fed’s “dots plot” reveal conflicting expectations for inflation, employment, and rate policy through 2025.
What does this uncertainty mean for businesses, investors, and the broader economy? And how should you be thinking about strategy in an environment where the Fed itself is split?

Key Episode Takeaways

  • 00:02 – Federal Reserve Announces Interest Rate Cut
  • 00:42 – Fed’s Dual Mandate and Conflicting Signals
  • 1:17 – Divergent Views in the Fed’s “Dots Plot”
  • 2:24 – Uncertainty and Future Outlook 
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The market fully expected at least that quarter point cut, but the question going forward becomes, how does the Fed balance that dual mandate? – Lauren Saidel-Baker Share on X
But broadly what this tells us is that this is an uncertain time. There's no one clear message coming from the Fed. - Lauren Saidel-Baker Share on X

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hi, I’m Lauren Saidel-Baker, and thank you so much for joining us for this special edition, September 17th version of ITR Economics Fed Watch.

We’re coming to you with a special update midweek this week because the Federal Reserve just announced that they are in fact lowering interest rates by that quarter basis point. If you remember back to when we spoke last week, this was our base case expectation. The question wasn’t, would they cut? It was, how much would they cut? I’ve personally been in the camp of 25 basis points. Some said 50, but again, what really matters is not how many cuts we do right away, but what is that ultimate path of interest rates going forward?

So as we had today’s decision, 25 basis points, that’s pretty normal. That is very well signaled. The market fully expected at least that quarter point cut, but the question going forward becomes, how does the Fed balance that dual mandate? They’ve been focused more on the employment side of the picture, and we saw that come through in some of the messaging today, but inflation is creeping back up. So if we start to peel back the onion, look beneath the surface of the messaging that was released today, there’s a little bit of conflict between those two goals in their dual mandate.

That’s coming through in things like the so-called dots plot. Within that summary of economic projections, we’re seeing various Fed officials have various expectations, not only for things like growth and inflation, but also for their view of where interest rates will end up this year. On the high end, we actually have what’s called a soft descent. So this individual didn’t vote against the 25 basis point rate cut in favor of keeping rates where they had been, but they gave that range of expectations, where rates had been 4.25 to 4.5%, for their expected year end 2025 value. So not an outright descent, but clearly some folks starting to see inflation being the broader concern that the Fed should be addressing. Now at the other end of the scale on the low end, there’s that one kind of funny dot hanging out down in the 2.75 to 3% range, several steps away from any of its nearest neighbors. That’s largely assumed to be Miran, the recent Trump appointee to the Fed board.

So take these all with a grain of salt, that was one descent that we saw in the current rate cut, someone who thought we should have gone further with the full 50 basis points. But broadly what this tells us is that this is an uncertain time. There’s no one clear message coming from the Fed. So we’re going to remain in that data dependent view. It will really matter going forward just how inflation comes in and just where we see the labor market shaking out.

So stay tuned for more. We’ll have additional data to come in our regularly scheduled Friday update. We hope you’ll join us again on ITR Fed Watch.