Markets are widely expecting the Federal Open Market Committee (FOMC) to deliver a dovish rate cut, as signs of a softening US labor market continue to mount. According to analysts at Brown Brothers Harriman (BBH), the worsening employment outlook could weigh further on the US Dollar (USD) and boost demand for risk assets.
Political Drama Swirls as Miran and Cook Join the Fed Meeting
The upcoming September 16–17 FOMC meeting is likely to draw even more attention, not just for the expected policy shift but also due to notable developments within the Fed’s ranks.
Stephen Miran was officially confirmed by the Senate just in time to participate. Known for his dovish stance, Miran is seen as the most likely FOMC member to vote for a 50 basis point rate cut, as opposed to the more widely expected 25 bps.
Meanwhile, Fed Governor Lisa Cook is also expected to attend the meeting, after an appeals court ruled that she can continue in her role while legal proceedings play out. President Donald Trump is reportedly considering escalating the case to the Supreme Court, but as of now, Cook remains on the board.
Key Economic Data in Focus Today
Investors will also be watching today’s US economic releases closely for further clues on the Fed’s next move:
- Retail Sales (8:30 AM ET / 1:30 PM London):
Consensus expects 0.2% month-over-month growth, slowing from July’s 0.5%.
The retail sales control group — a key component for GDP calculations — is forecast to rise 0.4%, just slightly below July’s 0.5%. BBH notes that retail sales have been holding up well over the past three months, continuing to grow at a trend pace. However, the sharp slowdown in labor demand suggests consumer spending may face headwinds in the coming months as household income pressures rise. - Industrial Production (9:15 AM ET / 2:15 PM London):
Markets expect a 0.1% contraction, matching July’s -0.1% reading.
Still, signs of stabilization are emerging. One key indicator — the ISM Manufacturing New Orders-to-Inventories ratio — is trending higher, suggesting firms may need to boost output soon as demand starts outpacing supply.
What This Means for Markets
With labor market concerns rising and political dynamics influencing the Fed’s composition, the stage is set for a dovish shift in US monetary policy. If the Fed delivers a rate cut along with soft forward guidance, the US Dollar could come under further pressure, while equities and risk-sensitive currencies stand to benefit.
Keep an eye on the Fed’s statement, the dot plot, and Chair Powell’s press conference for direction on how aggressively the central bank plans to ease in the months ahead.