The Minutes of the United States (US) Federal Reserve’s (Fed) meeting on September 16-17 regarding monetary policy will be released on Wednesday at 18:00 GMT.
During this meeting, the US central bank opted to lower the policy rate by 25 basis points (bps) to a range of 4%-4.25%, although Fed Governor Stephen Miran advocated for a 50 bps reduction.
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Jerome Powell and Team Decided to Cut Policy Rate in September
The Federal Open Market Committee (FOMC) agreed to a 25 bps interest rate reduction in September, as anticipated.
In their statement, the Fed recognized a slowdown in job growth and reiterated that inflation was still “somewhat elevated.”
The updated Summary of Economic Projections (SEP), released alongside the statement, indicated another 50 bps of cuts by year-end, followed by 25 bps reductions in 2026 and 2027.
During the post-meeting press briefing, Fed Chair Jerome Powell noted that there is no immediate need to adjust rates quickly, while mentioning increased risks to the employment mandate.
“Recent data indicates a significant downside risk to the labor market, which is widely acknowledged,” Powell stated.
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On the inflation front, he pointed out that rising goods prices due to tariffs may push inflation up but indicated it would likely be a temporary increase.
Analysts from TD Securities believe the FOMC Minutes will reflect the divide between hawks and doves within the Committee. “Most members likely viewed the policy adjustment as essential.
Nonetheless, some may see further easing this year as improbable due to inflation risks from tariffs. Many anticipate additional easing because of labor market concerns,” they mentioned.
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Impact of FOMC Minutes on the US Dollar
The FOMC is set to unveil the Minutes from its September 16-17 policy meeting at 18:00 GMT on Wednesday.
As per the CME FedWatch Tool, markets have fully priced in a 25 bps cut for the October meeting and assign an 80% chance for another 25 bps decrease in December. This
market sentiment implies that the US Dollar (USD) may depreciate against its peers immediately if the release confirms policymakers’ openness to further rate cuts in the remaining meetings of the year.
Conversely, the USD could maintain its strength if discussions suggest some officials might be hesitant to lower rates upon seeing improvements in the labor market or ongoing inflation concerns.
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However, the market’s response to the FOMC Minutes may be brief, as investors remain attentive to the possible US government shutdown.
If markets become optimistic about lawmakers restoring government funding, the USD might gain strength against its rivals immediately.
Still, investors may refrain from taking significant positions as they await released macroeconomic data, including Nonfarm Payrolls for September.
Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief forecast for the USD Index:
“The Relative Strength Index (RSI) indicator on the daily chart is nearing 60, and the USD Index is trading above the 100-day Simple Moving Average (SMA), which acts as a pivot level at 98.20. On the upside, 99.40 (Fibonacci 23.6% retracement of the January-July downtrend) stands as the next resistance level before reaching 100.00 (a round level, static level) and 101.35 (200-day SMA).”
“If the USD Index fails to hold above 98.20, technical buyers may be discouraged. In this case, 97.70 (20-day SMA) could be viewed as a temporary support level before 96.20 (the downtrend endpoint) and 95.00 (a round level).”
