Fed Rate Decision LIVE: Countdown Begins For Kevin Warsh-Led FOMC's Interest Rate Decision

The Fed wraps up its two-day policy meeting today, with traders widely anticipating a 25 bps rate hike. According to CME’s FedWatch tool, the likelihood of an increase sits at 92.7%, barely nudging from 93.5% a day ago.

A possible interest rate hike by US Federal Reserve on Wednesday could result in a correction in the S&P 500 as lower corporate margins weigh on profit outlooks and markets prepare for a tightening policy, Bloomberg News reported citing Macro Risk Advisors LLC.

The S&P 500 has  fell around 1% in September so far, its weakest month historically, amid concerns over higher energy costs and latest inflation data that has pushed US 10-year Treasury yields over 5% for the first time since 2023. Following this development, traders expect a quarter point rate increase by Fed Chairman Kevin Warsh on Wednesday, with CME's FedWatch tool estimating more than 92% chance of an interest-rate hike.

A rate hike on Wednesday could result in more pain, the news portal reported citing Dean Curnutt, CEO and founder of Macro Risk Advisors. 

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Goldman Sachs has reversed its call on the US Federal Reserve and now expects the central bank to raise interest rates by 25 basis points in its September meeting, Reuters reported, quoting the brokerage in a note on Friday.

The investment bank had previously expected the Fed to keep rates unchanged. Its latest forecast comes as markets price in a high probability of a rate hike and policymakers are seen as unlikely to surprise investors with a pause.

Goldman Sachs said the shift in its forecast was driven primarily by market pricing rather than a significant change in its economic outlook, Reuters reported.

The brokerage also said the recent surge in oil prices could make some policymakers more inclined to support additional tightening.

The revised call follows stronger-than-expected US producer price data and a surge in oil prices above $100 a barrel, which have renewed concerns about inflation.

Following the announcement of the rate decision and monetary policy statement, Fed Chair Kevin Warsh will hold his post-meeting press conference half an hour later at 2:30 p.m. ET (12 a.m. IST on Sept. 17).

The press conference will be streamed live on the social media handles of the Federal Reserve on platforms such as X and YouTube.

NDTV Profit will also stream the FOMC press conference on its YouTube channel.

Thierry Wizman and Gareth Berry, global macro strategists at Macquarie, highlighted the diplomatic balancing act facing the central bank chief. "Kevin Warsh has a conundrum," they wrote in a research note. They explained that Warsh must weigh political appeals for lower borrowing costs against internal committee sentiment favouring a rate hike, concluding that Warsh is likeliest to "go with the internal flow and accede to the majority's wishes for a hike".

Beyond the rate verdict itself, investors will scrutinise the Fed's updated Summary of Economic Projections and "dot plot" chart for vital clues regarding projected interest rate trajectories.

Prominent market analysts emphasise that stronger economic indicators have constrained the central bank's room to manoeuvre. Stephen Juneau, senior US economist at Bank of America, noted that Chair Kevin Warsh "kind of boxed himself into where the data needed to be very soft for the Fed not to follow through with a hike", reported Reuters.

• West Texas Intermediate crude fell 1.9% to $103.79 a barrel
• Spot gold rose 1.1% to $4,340.66 an ounce

• The yield on 10-year Treasuries declined two basis points to 4.98%
• Germany’s 10-year yield declined one basis point to 3.53%
• Britain’s 10-year yield declined seven basis points to 5.31%

• Bitcoin fell 0.2% to $75,746.42
• Ether fell 0.1% to $2,402.57

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1534
• The British pound fell 0.2% to $1.3452
• The Japanese yen was little changed at 155.17 per dollar

Dow Jones rose 0.05% to 52,115.35, while S&P 500 was up 0.24% to 7,604.17. Tech heavy Nasdaq also rose 0.43% to 26,093.60 minutes after open.

Despite the firmer futures, macroeconomic risks remain significant. Crude oil prices are holding above $100 a barrel, with Brent crude futures down 0.7% at $107.92 a barrel and West Texas Intermediate futures down 1.2% at $104.55. At the same time, Treasury yields have surged on expectations of persistent inflation. The 10-year US Treasury yield was slightly above 5%, while the 30-year yield stood at 5.374%.

Higher bond yields increase the return available from relatively safer assets and can put pressure on equity valuations, particularly when inflation remains above the Fed's comfort zone.

Investors may be positioning ahead of greater clarity on the Fed's rate path.

While a 25-basis-point hike is largely priced in, uncertainty remains over what comes next. Markets are currently assigning a 45% probability of another hike in October and 30% in December.

The Fed's statement and Chair Kevin Warsh's guidance will therefore be closely watched for signals on whether Wednesday's move is a one-off adjustment or the beginning of a sustained tightening cycle. A clearer outlook could help reduce some of the uncertainty currently weighing on risk assets. Investors are likely to focus not only on the rate decision but also on the Fed's assessment of inflation, economic growth and the trajectory of future policy.

US stock futures edged higher on Wednesday despite growing expectations that the Federal Reserve will raise interest rates, potentially marking the beginning of a new rate-hiking cycle over the coming months. S&P 500 futures were up 0.2%, while Nasdaq-100 futures gained 0.4%. Futures linked to the Dow Jones Industrial Average climbed 77 points, or 0.2%, ahead of the Fed's policy decision.

The US Federal Reserve's two-day policy meeting is underway, with markets bracing for a closely watched decision on interest rates. The Fed is widely expected to deliver a 25 basis point hike on Wednesday, which would mark its first rate increase since July 2023.

While the rate hike is largely priced in, investors will turn their focus to the Fed's updated economic projections and “dot plot” for clues on the pace and extent of further tightening. Persistent inflation, elevated energy prices and geopolitical tensions have complicated the outlook, keeping the risk of higher-for-longer rates firmly in focus.