Will US Fed cut rates by 25 bps or 50 bps? Here’s all you need to know

As investors closely watch the Federal Reserve’s upcoming meeting on September 18, all eyes are on Chair Jerome Powell. It’s been over four years since the last interest rate cut, and the central bank is now expected to lower rates again, with a 25 or 50 basis point (bps) cut on the table.
A cut in rates would mean lower borrowing costs, benefiting everything from mortgages to corporate loans.
Most importantly, it might help the US economy achieve the elusive ‘soft landing,’ a term used to describe an economic slowdown without a full-blown recession.
The possibility of lower rates has already lifted global markets, with many experts predicting a 25-bps cut. This would ease pressure on the US economy, especially as inflation stabilises and the labour market cools.
However, some analysts suggest that a larger cut of 50 bps could signal growing concerns about economic health, sending mixed signals to investors.
Powell, in his recent speeches, has signalled that inflation is moving toward the Fed’s long-term target of 2%, which leaves room for a rate cut.
Yet the magnitude of the cut remains uncertain, and the decision will likely have ripple effects across global markets, including India’s Dalal Street.
Experts are divided on what the Fed will do.
Swapnil Aggarwal, Director at VSRK Capital, believes the Fed’s decision could be a cautious step to either support a slowing economy or encourage growth.
“If the rate cut is due to low inflation and stable growth, markets could rally. But if it’s because of economic slowdown concerns, the effect may be muted,” he explained.
Palka Arora Chopra from Master Capital Services highlighted that a 25-bps cut is already priced in, while a 50-bps cut could be a more aggressive move to stimulate the economy. “Persistent low inflation can lead to stagnation, so the Fed might act more decisively,” she added.
Raj Patel, CMO of MintCFD, expects a modest 25-bps cut. He warned, however, that a larger cut might stir concerns about a deeper economic slowdown. “If we see a 50-bps cut, it could trigger both a rally and worries about recession,” he noted.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, echoed similar concerns. “A 50-bps cut might suggest the Fed sees more serious issues ahead, which could dampen investor sentiment,” he said.
With the decision looming, the extent of the rate cut could shape market reactions for months to come. While many expect a 25-bps reduction, a 50-bps cut might signal growing worries about economic growth, complicating the outlook for investors.