By GoldFXPro | Analyst: Naveed Anjum | Updated: October 30, 2025
The Federal Reserve is expected to cut rates by 25 basis points at the September 2025 FOMC meeting. Learn how this decision could impact global markets, currencies, and gold prices.
The Big Picture: What’s Coming at the FOMC
The Fed’s meeting this week is getting a lot of attention—and for good reason. Markets are broadly expecting the Fed to announce a 25-basis-point (bp) rate cut, taking the federal funds rate down to a 4.00%-4.25% range. Investopedia
Why is this such a big deal? Because the Fed hasn’t been in easing mode for a while. Inflation remains sticky, jobs are slowing but not collapsing, and global central banks are moving too. This meeting will reveal how the Fed sees the balance of risks, not just the cut itself.
Why the Fed Is Cutting Now
Here are some of the emotional under-currents and real‐world pressures behind the decision.
- Labor market jitters: Job gains have slowed and the unemployment rate has edged up, though it remains low. The Fed statement notes that downside risks to employment “have risen. Federal Reserve
- Inflation still a worry: Although inflation has cooled from its peak, the Fed acknowledges it “has moved up and remains somewhat elevated. Federal Reserve
- Growth slowing: Economic activity appears to have moderated in the first half of the year. That means the Fed is balancing between tackling inflation and not choking off growth. Federal Reserve
- Global and financial conditions: With other central banks (for example, Bank of Canada) also expected to ease, the Fed must consider currency and capital-flow impacts.
In short: The Fed is cutting not because everything is rosy, but because the risks of doing nothing are growing.
What the Fed Will Show Us
Watching closely this week:
- The economic projections The Fed will publish its Summary of Economic Projections (SEP) showing where policymakers expect rates, inflation, unemployment and growth to go.
- The language/tone in the statement A cut alone would be expected. But what the Fed says about future cuts more aggressive, gradual, or paused? is critical.
- Data-dependency signals Expect emphasis on incoming data, rather than a blanket promise of cuts.
For example: The official statement said that, “In considering additional adjustments … the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. Federal Reserve
Global Backdrop: It’s Not Just the Fed
The Fed’s moves don’t happen in isolation here’s what else is happening globally:
- The Bank of Canada is expecting a 25 bp cut as well (to about 2.50%).
- In the UK, inflation (core CPI) remains elevated, making the Bank of England likely to hold steady rather than cut immediately.
- In the euro-area, headline inflation is expected around 2.1% y/y and core around 2.3% y/y still above target, but easing.
- Germany has approved significant fiscal spending (infrastructure, defence) which may support growth, putting extra complexity in the mix.
- Japan continues to struggle with a negative trade balance as exports to the US weaken.
All of these factors feed into the Fed’s mindset: they’re looking at global growth, currency flows, inflationary pressures abroad and how that might bounce back to the US.
Markets & Currency Reactions (with a Human Feel)
Here’s how market participants are feeling and reacting.
- Equities: Global stocks traded in mixed fashion ahead of the Fed’s decision. Some optimism (growth hopes) but also caution (inflation risks).
- Currencies: The US dollar has been under pressure as markets anticipate rate cuts. For instance, EUR/USD climbed. On the flip side USD/JPY was sliding toward the lower end of its range (around JPY 146).
- Bond yields: Yields have edged lower at the front end as rate-cut expectations grow, but any sign of hawkishness could send them right back up.
- Emotional tone: Think of it this way investors are both hopeful and wary. They’re excited about easier rates, but nervous because the big question is what’s next? Not just the cut, but the follow-through.
What This Means for You (Especially If You Trade Gold)
Since you’re into trading and follow gold (e.g XAUUSD), here are some thoughts:
- Lower rates = potential tailwind for gold A rate cut tends to weaken the dollar and reduce real yields, both of which are positive for gold.
- But the story isn’t that simple If the Fed expresses caution and signals fewer cuts, that might temper the gold rally even if the cut happens.
- Watch the timing With central banks globally easing, the relative effect on the dollar and global liquidity could amplify gold’s move but only if the path of cuts is credible.
- Expect chop Because markets have heavily priced this in, the actual move might produce less upside in gold than anticipated but could produce volatility.
Final Thoughts: What to Watch
Here are a few things to keep an eye on if you’re trading or investing:
- The Fed’s projection for future rate cuts Are they expecting cuts into 2026? Or fewer than markets hope?
- The language around inflation and employment risks: If the Fed downplays labour market weakness, you might see a market sell-on-good-news effect.
- The global interplay How central banks like the Bank of Canada and the Bank of England respond will influence currency flows and risk sentiment.
- The market expectation vs. reality gap If the cut is expected and delivered, but the Fed signals delay after that, markets might react negatively despite the cut itself.
Ultimately: The meeting matters less for the cut itself (since that’s mostly priced in) and more for what comes next. If you’re trading gold (or any risk asset) the message out of this meeting will matter.
Sources:
- Federal Reserve official statement for September 17 2025. Federal Reserve
- Reports on cut expectations, labour and inflation signals. Investopedia+2Kiplinger+2
- Global context and other central banks. (Various media oversights)
What is the FOMC meeting and why should I care
The Federal Open Market Committee (FOMC) is the Fed’s main policy‐making body. At these meetings they set the federal funds rate (what banks charge each other overnight) and send signals about where policy is going. Because this influences borrowing costs, inflation, the dollar, and markets, it matters a lot.
How much is the Fed expected to cut rates
Markets are widely expecting a 25 bp cut at this meeting. Investopedia Some outlier firms were hoping for a 50 bp cut, but that seems unlikely.
How will this affect the U.S. economy
Lower borrowing costs are meant to boost spending and investment, supporting growth. But the Fed also needs to keep inflation in check. So it’s trying to thread a needle: ease enough to support the economy, but not so much that inflation runs away.
What does the Bank of Canada’s decision mean globally
When other central banks ease too, it reinforces a global trend of looser monetary policy. That can weaken the dollar and raise commodity prices (including gold). So Canada’s move adds context and weight to the Fed’s decision.
How are currency markets reacting right now
With the rate cut expected, the dollar has softened (making EUR/USD rally), while USD/JPY is under pressure. Bond yields have likewise eased a bit. But again: the reaction depends a lot on the tone of the Fed’s statement.
