Fed Set to Cut Rates: 105 Out of 107 Economists Expect First Move in a Year

The U.S. Federal Reserve is preparing for a highly anticipated September meeting. According to a Reuters survey conducted between September 8–11, 105 out of 107 economists expect the Fed to cut interest rates by 25 basis points on September 17. If confirmed, this would mark the first monetary policy easing since late 2024.

Market expectations: quarter-point cut, more to come Most analysts expect the benchmark rate to be lowered to a range of 4.00–4.25%. Only two foresee the possibility of a deeper 50-basis-point cut. 60% of respondents (64 out of 107) forecast rates will fall by a total of 50 basis points by December.37% predict a 75-basis-point cut, up sharply from 22% who held that view in August. Markets are now pricing in three cuts by year-end, compared to just two only weeks ago.

Weak labor market pressures the Fed Labor market data is showing clear weakness. Only 22,000 jobs were created in August, while unemployment edged up to 4.3%. A major annual revision revealed that from March onward, the economy actually created 911,000 fewer jobs than originally reported. Jobless claims rose to 263,000, the highest in nearly four years. According to Morgan Stanley’s chief U.S. economist Michael Gapen, the Fed now has “four months of evidence showing a slowdown in labor demand,” enough to justify easing despite sticky inflation.

Inflation remains above target Although inflation is cooling, the core reading (excluding food and energy) stayed at 3.1%, well above the Fed’s 2% target. Headline inflation reached 2.9% in August. Rising prices for cars, household goods, and food have been partly fueled by Trump’s tariffs, currently ranging from 10–50%. Import costs are increasingly being passed on to consumers. According to Atakan Bakiskan of Berenberg, the combination of tariffs, restrictive immigration policies, and lingering inflationary pressures is steadily eroding Americans’ purchasing power.

Politics vs. Fed independence President Donald Trump has repeatedly criticized Fed Chair Jerome Powell for not cutting rates this year and insists tariffs do not fuel inflation or hinder growth. Powell, however, has defended the independence of the Fed, arguing that monetary policy must not be swayed by political pressure. Analysts caution that the environment is extremely challenging. “If the Fed cuts too aggressively based on the theory that labor market risks outweigh inflation risks, it could amount to a policy mistake,” warned Stephen Juneau of Bank of America.

What to watch next At stake is not only the September cut but also the future path of rates. While markets are betting on three reductions this year, the tone Powell strikes after the meeting will be decisive. Attention also surrounds the nomination of new Fed governor Stephen Miran, Trump’s pick, who may not be confirmed in time for next week’s FOMC meeting.

#Fed , #Powell , #Inflation , #USPolitics , #GlobalMarkets

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