FOMC meet begins today: US Fed likely to reduce policy rates by 25-50 bps

FOMC is expected to lower policy rates by 25 or 50 basis points.

Businesses and investors around the world are focused for months on the two-day Federal Open Market Committee (FOMC) meet beginning September 17, hoping that the US Federal Reserve will start easing the policy rates.

The FOMC is expected to lower the policy rates by 25 or 50 basis points (bps). Investors will also await the Fed commentary to gauge the likely frequency and size of future rate cuts.

US Fed chief Jerome Powell will chair the two-day FOMC meet and announce the outcome on September 18 around 11.30pm Indian time, followed by a press meet.

Experts believe this could be the start of a series of rate cuts. Powell, in his speech last month in Jackson Hole, Wyoming, stressed on the Fed's readiness to cut rates to support the job market and achieve the challenging "soft landing" in the US economy. Soft landing refers to the central bank's attempt at lowering the inflation without causing a deep recession and a spike in unemployment.

In its last FOMC meeting chaired by Powell, Fed decided to maintain the key interest rates unchanged, keeping them in the range of 5.25 to 5.50 percent. This could be the Fed's first rate cut since March 2020, when rates were slashed to near-zero to support the economy during the Covid-19 outbreak.

The Fed began raising interest rates in 2022 in response to a surge in inflation caused by post-pandemic supply issues and the ongoing conflict in Ukraine. The key lending rate has been held at a two-decade high of 5.25 to 5.50 percent for the past 14 months.