All Eyes on Powell as Fed Poised for First 2025 Rate Cut

Mumbai, September 17, 2025: We are already in the ninth month of the year, and there has been no announcement from the US Federal Reserve in terms of policy changes. There is widespread anticipation within the markets as the Reserve gears up to announce its first interest rate cut today. It remains to be seen whether there is any cut or continues to stay steady for the fourth quarter in succession. Given the backdrop of growing unrest and a slowing economy, there is a possibility of a 25-basis-point reduction.

Fragile US Economic Indicators

The economic situation in the US is highly unstable as unemployment has surged to its highest level in the last four years. As per the latest US jobs report, a mere 22,000 jobs were added in August, which is the weakest since things started normalising post-pandemic. The labour market momentum has become a major concern in recent times. The Fed has been taking cautious measures despite repeated calls from President Donald Trump for lower rates. It has become increasingly difficult to balance the risks of weaker growth against the possibility of inflation being pushed higher by ongoing tariff measures.

Market Bets on 25 bps Cut

Acknowledging the mounting challenge, Fed Chair Jerome Powell emphasised rising inflation risks even as employment risks are sliding downwards. The traders are unanimously anticipating a 25-basis-point cut, with CME’s FedWatch tool assigning a 96% probability. A deeper cut of 50 basis points seems highly unlikely, considering the current Fed’s key rate, which stands between 4.25% and 4.5%.

Impact on Indian Markets

Indian equity markets will track the decision closely. Benchmark indices have already gained in nine of the last ten sessions, and a Fed rate cut could provide additional support. Analysts suggest the move may particularly benefit financial and IT sectors in India, while also giving the Reserve Bank of India more flexibility for its own policy decisions.

With Washington softening its tone towards New Delhi and trade talks resuming, experts believe the combination of a rate cut and easing tensions could help slow the pace of outflows from Indian markets.

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