Markets Await Fed Dot Plot Release, Monetary Policy Direction in the Spotlight
Global financial markets are awaiting the release of the latest Federal Reserve dot plot, which will be announced after the FOMC meeting on September 16-17, 2025. The graph, which contains each member's interest rate projections, is believed to be a key indicator of the direction of US monetary policy through 2027.
Previously, the June dot plot showed that the median FOMC member predicted two interest rate cuts this year. However, with inflation remaining above target and the labor market starting to weaken, analysts believe the latest projections are potentially more cautious. There is a possibility of only one interest rate cut in 2025, with a slower easing path for 2026 and 2027.
Continued high core inflation data and the risk of import tariffs mean the Fed is not expected to aggressively lower interest rates. Some economists even predict that interest rate projections for 2026 and 2027 will be revised upwards from previous estimates.
Financial markets have now fully priced in a 25 basis point cut at the September meeting. However, market participants will be closely monitoring how the dot plot depicts the medium-term policy path. If the number of cuts is smaller than expected, bond yields could remain high and pressure risk assets. Conversely, more dovish guidance could potentially boost stocks and precious metals.
Initial Market Reaction
The US dollar typically strengthens if the dot plot indicates a higher-than-expected interest rate path, and weakens if the outlook is more dovish.
Gold and silver tend to rise if projections of interest rate cuts are more aggressive, as the opportunity cost of holding non-interest-bearing assets becomes lower.
US stocks generally react positively to lower interest rate outlooks, although the banking sector can be pressured by narrowing interest margins.
US government bonds (Treasuries) are sensitive to the dot plot; if projections show interest rates remaining high for longer, yields rise and bond prices fall.
Cryptocurrencies like Bitcoin and Ethereum often move volatile following the dot plot release. Projections of faster interest rate cuts typically support crypto rallies due to increased market liquidity. Conversely, if the Fed signals a "higher for longer" stance, digital assets could be pressured by capital flows back into bonds and the dollar.
Thus, this dot plot release is seen as a crucial moment in determining the future direction of US interest rates. Fed Chairman Jerome Powell's post-meeting remarks will also be in the spotlight, particularly regarding how the central bank balances its inflation mandate and employment stability amidst fragile economic conditions.
Source: Newsmaker.id
