FOMC Quicktake: They Cut, So What
Zachary Griffiths, CFA - Head of IG & Macro Strategy, CreditSights
Winnie Cisar - Global Head of Strategy, CreditSights
Bryan Perez - Analyst, Credit Strategy, CreditSights
Kathleen Tang - Analyst, Strategy, CreditSights
17 September 2025
Insights into the Fed’s rate cut and its implications for the policy path, QT, markets, and credit risk, including:
- Why this move matters now: Understand how a rate cut paired with hawkish messaging reframes the inflation-versus-labor trade-off.
- Dot plot outlook: See how updated projections shape the expected path for policy rates and the “restrictive for longer” narrative.
- QT status and signals: Learn why balance sheet runoff remains unchanged and what to watch for around the potential end of QT.
- Market reaction explained: Uncover how rates, equities, and credit responded—and what that implies for risk appetite and positioning.
- Policy risk and credit spreads: Grasp why uncertainty is elevated and why tight spreads may offer limited protection if fundamentals weaken.
Executive Summary
- The Fed delivered the widely expected 25 bp rate cut, while new Fed Governor Stephen Miran dissented, preferring to cut 50 bp. It seems that his submission to the dot plot forecasted cutting 150 bp total in 2025. The median policy maker expects to cut 50 bp more this year, for 75 bp of total rate cuts.
- The dot plot implies 25 bp of cuts in 2026 and 2027, taking the policy rate to 3.125% at the end of 2027 and holding steady at that rate in 2028. That policy rate is still modestly restrictive, given the longer run dot is still 3%. Coming into the meeting, SOFR futures had priced a terminal rate of closer to 2.9%.
- Quantitative tightening (QT) was left unchanged and received little attention at the presser. We expect QT will be wrapped up around year end.
The Fed cut 25 bp as widely expected and expects to deliver 25 bp cuts at the two remaining FOMC meetings in 2025. It had previously called for just 50 bp of cuts in 2025 (chart below). There was just one dissent at this meeting, by the newly-minted Fed governor Dr. Stephen Miran, versus two in July when the Fed decided to hold. It also appears that his projections called for another 100 bp of cuts this year (on top of his preferred 50 bp today) as one dot registered for 2025 is 2.875%. The median policymaker expects to cut 25 bp more in 2026 and 2027, taking the policy rate to 3.125% in 2028. The new 2028 dot shows it expects to hold steady at 3.125%, which is still above the longer run neutral rate estimate of 3% (chart below).
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