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The likelihood of a 25 basis points rate cut by the US Federal Reserve in September has increased, but the final decision will depend on upcoming economic data, according to a recent report by ICICI Bank.

The report stated that there is now a 65 per cent probability of a rate cut in September and a 35 per cent chance that the Fed will maintain the current rates.

However, it emphasised that the final decision will remain contingent on the flow of economic data. This is because two inflation reports and two labour market reports are scheduled for release before the next policy meeting.

"If inflation uptick remains modest and labour market starts to deteriorate, the FOMC will likely cut rates by 25 bps in September and 25bps in December," the report noted.

However, in a scenario where inflation proves to be stickier and the labour market remains balanced, the possibility of delaying the rate easing cannot be ruled out. The bank added that it will adjust its projections accordingly based on how the data evolves.

The FOMC, in its latest policy meeting held on Thursday (IST), decided to keep the benchmark interest rates unchanged at 4.25 per cent to 4.5 per cent. This marks the fifth consecutive meeting in which the Fed has opted for a status quo.

Interestingly, the decision to hold rates was not unanimous. Two of the eleven voting members, Federal Reserve Governors Christopher Waller and Michelle Bowman, dissented, indicating a preference to cut rates during the July policy meeting.

These dissenting views were largely expected and reflect the growing divergence within the FOMC.

The ICICI Bank report also pointed out that this was the first major dissent by two Fed Governors since 1993.

It added that the dissent may be an attempt by the two members to gain support from the administration, potentially with an eye on leadership changes, as the current FOMC Chair's term is set to end in May 2026.

Despite the internal differences, the majority of the FOMC members supported the decision to maintain the current policy rate, showing that a cautious approach continues to guide the Fed's monetary stance amid evolving economic conditions.