Fed preview: Deep divide to result in hawkish cut?

• Fed expected to cut rates for third time in 2025
• Updated dot plot, Powell and economic projections in focus
• Traders are pricing in 20% chance of a rate cut by January 2026
• Over the past year USDInd has moved ↑ 0.6 % or ↓ 0.2% post Fed
• XAUUSD, Bitcoin & US Indices to see heightened volatility

The Federal Reserve is widely expected to deliver its third rate cut of 2025 when it meets on Wednesday.

However, the outlook for 2026 remains uncertain due to a deeply divided committee and the replacement of the current Fed Chair, Powell.

Much attention will be directed toward the dot plot, policy statement, and Powell’s press conference for clues on future policy moves.

When is the Fed meeting?

Wednesday, September at 19:00 pm GMT while Powell’s press conference will be at 19:30 pm GMT.

Expected values…

Fed funds target range: Cut by 25 bps to 3.50%–3.75%

Fed Policy outlook:

Traders are pricing in a 97% chance of a rate cut in December with a 20% chance of another cut by January 2026.

But the question on investors’ minds is what direction the Fed will take in the new year, considering the battle between hawks and doves.

Much attention will be paid to the number of dissenters against a 25bp cut.

Back in September, the dot plot showed Fed officials in favour of a 25bp rate cut in December and only on 25bp cut in 2026.

If the dot plot signals more than one rate cut in 2026, this may keep equities and gold buoyed.

Potential market impact…

Dovish cut: supports risk assets (US equities), softens USD, lowers yields; constructive for gold/silver.

Hawkish cut: pressures equities, boosts USD, lifts yields; headwind for precious metals.

Here is how these assets are forecasted to react in a 6-hour period after the Fed decision.

Source: Bloomberg.

• USDInd: ↑ 0.6 % or ↓ 0.2%
• NAS100: ↑ 1.6 % or ↓ 1.5%
• US500: ↑ 1.3 % or ↓ 1.4%
• XAUUSD: ↑ 0.3 % or ↓ 1.0%
• BITCOIN: ↑ 2.0 % or ↓ 1.8%