Powell to 'strike dovish note' ahead of 'near certain' 25bp cut

We see a 25 basis point cut from the Fed as a near certainty on Wednesday.

The latest batch of data out of the US jobs market has been a dud, plain and simple, effectively extinguishing any last traces of doubt over a September move. While we expect two or three of the doves to dissent in favour of a 50bp cut, we think that most of the committee will opt for a smaller rate adjustment for risk of stoking inflation expectations and spooking the Treasury market.

Chair Powell appears set to strike a dovish note. He will likely no longer describe the jobs market as “solid”, while reiterating that any tariff-induced spike in inflation will probably be temporary.

The “dot plot” will also be shaved lower, with the median dots to possibly show three cuts this year and a couple more in 2026. This would partly, but not fully, close the gap between the Fed’s interest rate expectations and that held by the market.