U.S. FOMC Meeting Minutes (September 16-17, 2025)

FOMC Members Saw Balance of Risks Shift in September 

• The Federal Reserve Open Market Committee (FOMC) lowered the federal funds rate to a target range of 4.25% to 4.00% in September, following data and data revisions in August that showed the labor market was both softening and weaker than previously revealed. 
• The minutes showed that the committee is still focused on the risk that tariffs keep inflation elevated and increase inflation expectations. Some, however, remarked that the upward pressure on prices from tariffs has been muted compared to what was expected earlier in the year. There was some disagreement among participants about whether inflation would still be making progress towards the committee's target in the absence of this year's tariff increases, and some participants stressed the importance of continuing to make progress towards the 2 percent target to keep long-run inflation expectations anchored. 
• On the labor market, participants noted that the lower level of job gains over recent months was likely due to declines in both labor supply and labor demand. While low net immigration and limited increases in the participation rate have been constraining labor supply, slowing growth and the uncertainty of the effects are tariffs are restraining hiring. Considering a broad range of indicators, participants generally assessed that there was not a sharp deterioration in labor market conditions. But participants judged that downside risks to employment had risen, despite the unemployment rate remaining low, and that most recent indicators suggested economic growth moderated in the first half of the year. 
• Members agreed that, "in considering additional adjustments to the target range for the federal funds rate," the Committee would "carefully assess incoming data, the evolving outlook, and the balance of risks". 
• Almost all members in attendance agreed to lower the target range for the federal funds rate; one member preferred to reduce the target range an additional ¼ percentage point. The dissenter, Governor Miran, believed that the softening labor market and factors reducing the neutral rate warrant additional easing. This is not new information revealed by the minutes, as he had discussed this further in his speech at the Economic Club shortly after the meeting.

Key Implications

• The minutes contained little surprise. The August jobs data and revisions shifted market expectations sharply towards a rate cut at this meeting, and the minutes show that FOMC members reacted to the data as we would have expected. The minutes point to this decision being motivated by a subtle shifting of the balance of risks, rather than a major reassessment of the state of the economy. 
• Committee members indicated they would continue to assess incoming data in making future adjustments, and there was no hint in the meeting minutes about what they might do in the case of missing or delayed data in the event of a government shutdown. Nonetheless, we expect that the Committee is likely to maintain its assessment of the balance of risks revealed in the minutes, and reduce its target rate another ¼ percentage point at its next meeting.

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