US Federal Reserve Meeting on September 17-18, 2025: Likelihood of a 25 Basis Point Rate Cut
The US Federal Reserve's Federal Open Market Committee (FOMC) meeting is scheduled for September 17-18, 2025, with the interest rate decision announcement expected at 2:00 PM ET on September 18 (which is approximately 11:30 PM IST on the same day). Based on recent economic data, including a softening labor market (e.g., August 2025 nonfarm payrolls adding only 22,000 jobs, far below expectations of 75,000, and unemployment rising to 4.2%) and persistent but moderating inflation (core CPI expected at 3.1% for August, above the 2% target but with tariffs contributing to upward pressure), market expectations strongly favor a rate cut. The current federal funds rate stands at 4.25%-4.50%, unchanged since December 2024 after a series of holds in early 2025.
A Reuters poll of 107 economists (conducted September 8-11, 2025) shows 105 predicting a 25 basis point (0.25%) cut to 4.00%-4.25%, driven by labor market concerns outweighing inflation risks. This aligns with CME FedWatch Tool probabilities, pricing in over 90% odds for a 25 bps cut and about 10% for a more aggressive 50 bps reduction. Fed Governor Christopher Waller has publicly supported a 25 bps cut starting in September, citing anchored inflation expectations and rising labor market risks. However, some analysts (e.g., from Morgan Stanley) note a 50-50 chance due to sticky inflation from tariffs (average US tariff rates at 18.4% in July 2025), potentially leading to a hawkish surprise if CPI data (due September 12) exceeds forecasts. Overall, the consensus from sources like Reuters, CNBC, and Investopedia substantiates a high probability (80-95%) of at least a 25 bps cut, marking the first easing move in 2025 after five holds.
Impact on Indian Stock Markets and Nifty 50
A Fed rate cut typically signals global monetary easing, which can boost emerging markets like India by encouraging foreign institutional investor (FII) inflows into higher-yielding assets. Lower US rates reduce the appeal of US Treasuries (e.g., 10-year yields could fall to around 4.07%), weakening the US dollar and supporting the Indian rupee (currently around 85.3/USD). This often leads to positive sentiment in Indian equities, particularly in rate-sensitive sectors like banking, IT, autos, and FMCG, as cheaper global liquidity flows into growth-oriented markets.
Historically, during Fed easing cycles (e.g., 2024's 50 bps cut in September), Nifty 50 has rallied 1-2% in the immediate week, with broader gains if the cut is dovish. A 25 bps cut could lift Nifty by 100-200 points short-term, assuming no major global shocks. However, if the cut is accompanied by hawkish guidance (e.g., fewer future cuts due to tariffs), it might trigger a "sell the news" event, as seen in December 2024 when Nifty fell 1.3% post a 25 bps cut with reduced 2025 projections. Experts from Economic Times and Livemint recommend a "buy on dips" strategy, as Nifty valuations are stretched (forward P/E around 22-23x) but supported by strong domestic fundamentals like GST reforms and US-India trade talks. Sectors like IT (e.g., Infosys, TCS) and metals could benefit most from a weaker dollar, while banking (e.g., HDFC Bank, Axis) may see margin pressure but overall upside from inflows.
Trading Strategy for Current Month Nifty 50 Index Futures (September 2025 Expiry)
The current month Nifty 50 futures (September 2025 expiry) are trading around 25,090-25,165 as of September 12, 2025, reflecting a bullish breakout above the 25,100-25,120 resistance zone amid Fed cut optimism. The contract has risen 0.5-1% in recent sessions, with open interest stable and volume indicating sustained buying. Technical indicators (e.g., RSI above 50, holding above 50-day EMA at ~24,900) suggest upward momentum, but volatility is expected around the Fed announcement due to global event risk. A decisive close above 25,200 could target 25,300-25,500, while a drop below 25,000 might test 24,960 support.
Recommended Timing to Buy:
Optimal Entry: September 13-16, 2025 (Pre-Meeting Dips). With the current date being September 13, monitor for intraday pullbacks to 25,000-25,060 (key support from recent lows and 20-day EMA). This aligns with a "buy on dips" approach recommended by analysts at Hindu BusinessLine and Enrich Money, as profit-taking may occur ahead of the event amid high valuations. Avoid buying at current highs (above 25,120) to mitigate "sell the news" risk; wait for a 0.5-1% correction, which is common pre-Fed (e.g., Nifty dipped 0.2% on September 11 before rebounding). If CPI data on September 12 surprises higher, it could create a buying opportunity near 24,960. Use stop-loss at 24,900 to protect against breakdown.
Probable Exit Strategy:
Short-Term Target (Post-Announcement): September 19-20, 2025, at 25,250-25,300. If the Fed delivers the expected 25 bps cut with dovish forward guidance (e.g., signaling more easing in December), exit on a 1-1.5% rally from entry (e.g., from 25,060 to 25,300), as historical patterns show Nifty futures gaining 100-150 points in the 1-2 days post-cut. Trail stops to 25,100 for partial profits. If the cut is 50 bps (10% probability), extend hold to 25,500 by September 22, but watch for overbought RSI (>70).
Risk Management: Position size at 0.5-1% of capital per trade, given expiry on September 25. If hawkish (e.g., no cut or only 25 bps with inflation warnings), exit immediately on any drop below entry to limit losses to 0.5-1%. Broader outlook remains bullish (support at 24,900), but avoid o
leveraging due to potential rupee volatility from dollar movements.
This strategy is derived from technical analysis on TradingView and Hindu BusinessLine, combined with event-driven insights from Reuters and Economic Times. Always consult a certified advisor, as futures trading involves high risk and leverage; past performance (e.g., 2024 Fed cuts leading to 2% Nifty gains) does not guarantee future results.
Anish Jagdish Parashar
Indirect tax india online research
Disclaimer: Content reflects personal views of the author and for trading and investment purposes consult with your financial advisor.
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