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Outlook for the Week of September 15 – 19

September 16, 2025 OnEquity

The week of September 15–19 will be pivotal for global markets, with the Federal Reserve widely expected to cut rates and unveil its updated “dot plot,” while investors assess whether policymakers will align with calls for three cuts this year. The Bank of Canada is also projected to ease policy by 25 basis points amid weak data, and the Bank of England is set to hold steady, though the vote breakdown and UK inflation figures could sway sterling. In Asia, the Bank of Japan is likely to keep rates unchanged as political shifts add uncertainty, while Governor Ueda’s remarks will be closely watched. With central bank decisions and key economic indicators in focus, the week could deliver significant moves across currencies and risk assets.

Key Points to Watch

  • The Fed is expected to cut rates, with focus on the updated “dot plot.”
  • The Bank of Canada is projected to cut rates by 25 basis points due to weak data.
  • The Bank of England is set to hold rates steady, though the vote breakdown could move sterling.
  • Amid political uncertainty, the Bank of Japan is also expected to leave policy unchanged.

Investors Expect Three Rate Cuts This Year

The U.S. dollar began the week softer after August’s disappointing jobs report fueled expectations of further Fed easing. It then regained ground midweek despite slowing producer prices but weakened again on Thursday after lower-than-expected jobless claims and a CPI surprise to the upside. Markets remain convinced that more than two quarter-point cuts are warranted before year-end.

Fed funds futures currently price in around 72 basis points of easing, with a 25 bps cut expected on Wednesday, September 17. There is even a small 7% chance of a 50 bps move. Still, markets broadly anticipate three consecutive 25 bps cuts at the remaining meetings this year. While weak labor data supports a dovish stance, the Atlanta Fed’s GDPNow model points to 3.0% growth in Q3, complicating the case for aggressive easing.

Will the Fed Align with Market Expectations?

A single 25 bps cut is unlikely to spark major volatility. Markets will instead focus on Chair Powell’s press conference and the updated economic projections, especially the “dot plot.” In June, the median forecast projected only 50 bps of cuts for this year, while seven officials favored no further easing. Aligning with current market pricing would require a significant shift in outlook.

The 2026 dot plot will also attract attention. In June, policymakers anticipated just one cut beyond the two in 2025, whereas markets expect three. Political developments could also influence the outlook: President Trump has signaled possible changes to the Board of Governors, and regional Fed leadership elections are due early next year—both factors that could reshape projections.

Economic Weakness Could Lead the Bank of Canada to Cut Rates

The Bank of Canada will decide policy before the Fed. In July, it held rates at 2.75%, citing resilience in growth and core inflation near 2.5% after fiscal adjustments. However, conditions have since deteriorated. The unemployment rate climbed from 6.9% to 7.1%, with 106,300 jobs lost between July and August. GDP contracted 0.4% in Q2, and July CPI slowed to 1.7% year-on-year from 1.9%, though the trimmed mean stayed at 3.0%. August CPI, due Tuesday, September 16, will be critical.

Despite sticky core inflation, economic weakness has increased expectations for easing. Markets now assign an 85% probability of a 25 bps cut this week and are nearly fully pricing another by year-end. A dovish signal could weaken the Canadian dollar further, extending the USD/CAD rally since September 1.

Bank of England Expected to Hold, With Next Cut in March

On Thursday, September 18, attention will turn to the Bank of England, followed by the Bank of Japan during Friday’s Asian session. The BoE cut funding costs to 4% in August, the lowest in over two years, though the decision required a second vote. The Bank expects inflation to peak at 4% in September—double its target—while Governor Bailey has cautioned about uncertainties in the pace of easing.

Markets are almost certain the BoE will hold steady this week. However, the vote split will be key: even one or two votes in favor of a cut could push investors to bring forward expectations, pressuring sterling. Currently, the next cut is priced in for March. UK CPI (Wednesday, September 17) and retail sales (Friday, September 18) will also be pivotal.

Conclusion

In Japan, political developments are adding uncertainty. Following Prime Minister Ishiba’s resignation, speculation has grown that his successor may favor looser policy, reducing the probability of near-term tightening to below 50%. Yet recent reports suggest the BoJ still sees scope for another hike this year, prompting a reassessment.

Markets assign about a 60% probability of a hike before year-end and fully price in a 25 bps increase by March. Governor Ueda’s remarks will be closely monitored. If policymakers reaffirm tightening bias, the yen could strengthen, though political shifts may complicate communication. The LDP’s leadership election on October 4—where frontrunner Sanae Takaichi is seen as supportive of monetary easing—could indirectly shape expectations.

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