On September 17, the Fed lowered its key interest rate by 25 basis points, bringing it back to the 4.00-4.25% range. The US central bank thus resumed its rate cuts after a nine-month pause, with the previous move having taken place in December 2024.
On this occasion, the Fed also updated its ‘dot plot’ projections, which reflect the individual expectations of the 19 members of the monetary policy committee. The median projection from these dots points to additional rate cuts in the coming months, with two 25-basis-point reductions expected before the end of the year and a similar cut planned for next year.
Our analysis
During his press conference, Jerome Powell explained that the decision to resume rate cuts was primarily based on risk management, with labor market risks now outweighing those of inflation. In fact, the Fed's central economic outlook has not changed significantly.
Additionally, there is a significant divergence in expectations among the 19 committee members. For instance, in 2025, nine members support fewer than two cuts, while ten members advocate for two or more cuts. Stephen Miran, a newcomer to the Fed and economic advisor to the US president, even projects below 3%.
Given the uncertainty surrounding the US economy, this divergence in expectations underscores how uncertain the pace of the Fed's next rate cuts remains.
Written on September 26, 2025. Opinions subject to change. This document has no pre-contractual or contractual value. It is provided for information purposes. The analyses and/or descriptions contained in this document should not be considered as advice or recommendations from Lazard Frères Gestion SAS. This document does not constitute a recommendation to buy or sell securities, nor does it encourage investment. This document is the intellectual property of Lazard Frères Gestion SAS - 352 213 599 RCS Paris 25, RUE DE COURCELLES - 75008 PARIS
