The Federal Reserve's First Rate Cut of the Year: A Summary of Dovish and Hawkish Analysts' Comments and Views

More than 70% of officials are inclined to cut rates 1 to 3 times in 2025. How do dovish/hawkish analysts view this rate cut?

Written by: Chloe, ChainCatcher

 

The US Federal Reserve (Fed) announced a 25 basis point rate cut at 2 a.m. on September 18, lowering the interest rate from 4.25%—4.50% to 4.00%—4.25%. After keeping rates unchanged for five consecutive meetings this year, this is the Fed’s first rate cut since last December and is expected to mark the beginning of a new rate-cutting cycle.

ChainCatcher has summarized the key points of the FOMC rate decision meeting, Powell’s remarks, the US economic outlook, and feedback from major institutions and analysts.

More than 70% of officials are inclined to cut rates 1 to 3 times in 2025

This time, the Federal Open Market Committee voted 11 to 1 to lower the benchmark interest rate by 25 basis points. The only dissenting vote came from the newly appointed Fed Governor Stephen Miran, who was appointed by Trump and officially sworn in as a Fed Governor on the 16th after a rapid Senate confirmation. His opposition was based on the view that rate cuts should be more aggressive, advocating for a one-time 50 basis point cut instead of the approved 25 basis points. His preference for a more aggressive easing was also reflected in the dot plot, where he was the only one to predict a much lower rate, indicating support for a cumulative 150 basis point cut by year-end.

According to forecasts, the Fed is expected to cut rates by another 75 basis points in 2025, highlighting the Fed’s growing concerns about risk balance. Although the Federal Open Market Committee emphasized its continued commitment to the 2% inflation target, in the context of slowing economic momentum, its tone is more supportive of growth and employment.

Based on data from the 19 officials who participated in this FOMC meeting, the majority (76.3%) are inclined to cut rates 1 to 3 times in 2025. About half (47.4%) support a 75 basis point cut, i.e., three times, while another 31.6% support a 25 basis point cut. A minority (5.3%) believe there will be no further cuts this year or even support a substantial 150 basis point cut. This shows that against the backdrop of continued signs of economic slowdown and gradually easing inflationary pressures, Fed officials generally favor maintaining an accommodative monetary policy and expect multiple rate cuts by year-end to stimulate economic growth.

The market currently believes that the central bank is preparing for a more accommodative policy path, with the future direction being entirely dovish. However, bitcoin’s reaction has been sluggish, with price consolidation dominating overall directional momentum.

After the meeting, Powell said he remains concerned about inflationary pressures from tariffs: “Our obligation is to ensure that one-time price increases do not turn into persistent inflation problems.” Powell also said, “Labor demand has already weakened, and the pace of recent job creation appears to be below the breakeven level needed to keep the unemployment rate unchanged.” 

When asked about the possibility of further rate hikes by year-end, Powell was cautious, stating that the Fed is currently in a “meeting-by-meeting adjustment situation.”

Institutional Observations

Seema Shah, Global Chief Strategist at Principal Asset Management: “The dot plot presents a variety of views, accurately reflecting the complex economic landscape caused by changes in labor supply, concerns about data accuracy, and uncertainty in government policy.”

CME Group market trader: “The FedWatch tool uses the price of 30-day federal funds futures contracts to calculate the market-implied probability of rate changes, estimating that there will be 2 to 3 more rate cuts next year.”

Seema Shah, Chief Global Strategist at Principal Asset ManagementSM, stated, “Next year’s dot plot brings together a variety of different views, precisely reflecting the complexity of the current economic outlook, including changes in labor supply, issues with data measurement, and the turmoil and uncertainty of government policy, all of which make this outlook even more unclear.”

Summary of Dovish/Hawkish Analyst Views

Dovish Views

Michael Gapen (Chief US Economist at Morgan Stanley): “The Fed cut rates by 25 basis points as expected and signaled more cuts ahead. The Fed now sees increased downside risk to employment, which justifies today’s 25 basis point cut and another 75 basis points by year-end. The updated forecast shows inflation may remain above 2.0% for longer, with PCE inflation raised from 2.4% to 2.6%. Overall, this is a dovish signal.”

Blair Shwedo (Bank of America): “The Fed’s decision was not surprising. Risk assets and US Treasuries seem to be focused on the Fed’s expectation of two more rate cuts this year. The decision should be positive for risk assets overall, and we should see credit spreads remain at historically tight levels.”

Brian Jacobsen (Chief Economist at Annex Wealth Management): “The Fed’s decision was in line with our expectations, while Miran cast a dissenting vote calling for a larger (50 basis point) cut.” 

Hawkish Views

Michael Rosen (Chief Investment Officer at Angeles Investments): “In this decision, the Fed not only lowered rates but also raised its inflation forecast. This reflects that, due to the recent slowdown in job growth and a slight rise in unemployment, the Fed hopes to stimulate economic vitality and increase employment opportunities through rate cuts. On the other hand, inflation remains above the Fed’s 2% target, and raising the inflation forecast means the Fed believes price pressures may be more persistent than previously thought. This forces them to carefully balance between easing too much, which could worsen inflation, and tightening too quickly, which could further harm the job market.”

Christopher Hodge (Chief US Economist at Natixis): “Powell needs to explain why the dot plot shows more rate cuts in 2026 when unemployment is lower and inflation is higher. The dot plot is a difficult-to-explain patchwork of forecasts, and the dovish dot plot seems to conflict with the predicted inflation/labor market dynamics.”

Finally, several analysts in the market have noted significant differences among Fed officials. Brij Khurana (Wellington Management) pointed out: “Only Miran dissented, pushing for a 50 basis point cut. The market had speculated that Waller and Bowman would also push for 50 basis points at this meeting.”

Although most officials in the latest dot plot predict two more rate cuts this year, pushing the benchmark rate to 3.5%–3.75%, the market is caught in a tug-of-war of observation and disagreement. Mark Malek of Siebert Financial remains cautious about overly optimistic prospects, believing that premature enthusiasm could lead to more severe stock and bond sell-offs, while Peter Cardillo of Spartan Capital sees this decision as a dovish signal and expects yields and the stock market to continue rising.