Market Minute: September 17, 2025 - What the Fed’s 0.25% Rate Cut Means for Markets and 2026
Who knew that the Rolling Stones were actually economists! In one of their famous songs, the refrain lets us know, “No, you can’t always get what you want.” That lyric felt fitting today as the long-awaited Federal Reserve meeting concluded.
Fed Delivers Expected Rate Cut
The Federal Reserve did deliver the widely anticipated 0.25% cut to the federal funds rate. Regular readers know we’ve been questioning how far the Fed would go, given stubborn inflation and a weakening employment picture. With its dual mandate of full employment and controlled inflation, today’s move seems like a compromise, acknowledging both pillars of that mandate.
The Devil in the Details
As always, the devil is in the details. Many market participants had been pricing in two to three cuts next year. However, the Fed’s dot plot shows a median estimate of 3.4% at the end of 2026 versus an expected rate of 3.6% at the end of 2025. This suggests that the officials who actually vote on the federal funds rate foresee only one rate cut in 2026, sharply contrasting with expectations for two to three rate cuts next year.
No Clear Consensus
The voting members hold a wide range of views, so there isn’t a strong consensus. This likely means we’ll need to watch economic releases closely to see whether the Fed becomes more or less active next year.
Balancing Jobs and Inflation
A few thoughts on today’s action. The Fed is trying to balance the job market and inflation. With employment weakening and recent job reports showing a much weaker hiring environment than previously thought, the Fed has cover to focus on supporting jobs. If employment remains soft, consumer spending will likely slow, and inflation may begin to decline toward the Fed’s target.
Investor Takeaways
For investors, rate changes are typically short-lived sugar highs followed by real thoughts on economic and capital market performance. We continue to stress the importance of developing a financial plan and maintaining a patient, long-term perspective.
Market Snapshot
As I write this at 3:32 PM on September 17th, the S&P 500 hit a high of 6,624 today and dropped to 6,551 after the rate announcement, and has since rebounded to 6,605. We believe the Fed will remain faithful to its data-dependent mantra, and clues for 2026 Fed activity will come from the upcoming economic releases on employment, inflation, and economic output over the next several months.
More to come. If you would like to discuss financial planning and how Innovative Asset Advisors can support you, please don’t hesitate to contact us at (475) 256-0174 or via our contact page.
