Anticipated Interest Rate Cut by Federal Reserve Amid Political Pressure
The Federal Reserve is set to announce its first interest rate cut of 2025 on Wednesday, September 18. This comes in spite of the increasing political pressure from the Trump administration and indications of a rising inflation trend due to tariff impacts.
Markets are heavily leaning towards a quarter-point (25 basis points) reduction from the current 4.25%-4.5% target range. According to CME FedWatch, the probability of this happening stands at a staggering 96%. This cut would signify the Fed’s first rate reduction since December 2024, after five consecutive meetings without any changes.
President Trump has been exerting pressure on Fed Chair Jerome Powell, demanding a significant cut in interest rates. His social media posts insist that the FOMC “MUST CUT INTEREST RATES, NOW, AND BIGGER THAN [Powell] HAD IN MIND.” Stephen Miran, the new Fed Governor and Trump’s appointee, is expected to dissent in favor of larger cuts.
The decision is set against a backdrop of a weakening labor market, with a mere 22,000 jobs added in August and a rise in unemployment claims. However, inflation remains above the Fed’s 2% target at 2.9%, creating a complex situation for policymakers. The Fed will also release updated economic projections and Powell will hold a press conference at 2:30 PM ET.
Source: CNBC