Economists widely predict 25 bps Fed rate cut next week

The Federal Reserve is expected to cut interest rates in its September 16-17 FOMC meeting. A Reuters poll showed 105 of 107 economists predict a 25-basis-point reduction on September 17, which, if passed, will become the central bank’s first instance of monetary policy easing since late ￰0￱ survey was conducted between September 8 and 11, in which most participants forecasted a quarter-point cut that will bring the benchmark rate to a range of 4% to 4.25%. Only two economists are seeing a larger 50-basis-point reduction as a possibility. 64 of 107 respondents, or 60%, projected that rates would fall by 50 basis points by December, while 37% predicted a 75 basis points reduction, an uptick from the 22% that held that view in ￰1￱ market data shows a weakening economy According to Reuters, economists believe weakness in the labor market should be enough rope for the central bank to pull into rate cuts . “ The Fed now has four months of evidence of a slowdown in labor demand that appears more persistent in ￰2￱ where inflation is today and ease policy to support the labor market,” remarked Michael Gapen, chief US economist at Morgan ￰3￱ US Labor Department reported that employers added just 22,000 jobs in August, far below expectations, while the unemployment rate edged up from 4.2% to 4.3%.

A routine annual revision released Tuesday showed the economy added 911,000 fewer jobs than initially estimated in the year through ￰4￱ unemployment claims surged to 263,000 in early September, the highest level in nearly four ￰5￱ said the combination of weaker hiring and rising layoffs breeds the prompt need for Fed action. “Right now, inflation is a key subplot, but the labor market is still the main story,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “That translates into a rate cut next week, and, likely, more to come.” Inflation still higher than Fed target, but steady The core inflation measure, which excludes volatile food and energy prices, is still higher than the Federal Reserve’s 2% target, but held steady at 3.1% year-over-year in ￰6￱ consumer prices rose 2.9% in the 12 months through August, compared with 2.7% the prior ￰7￱ costs for cars, household furnishings, and staples such as tomatoes and beef contributed to the ￰8￱ noted that tariffs imposed by the Trump administration could have impacted inflation, with most imported goods now subject to duties from 10% to as high as 50%, as companies pass higher costs onto consumers.

“President Donald Trump’s inflationary policies, tariffs, and restrictive immigration measures are gradually showing up in the hard data and continue to erode consumers’ purchasing power,” said Atakan Bakiskan, US economist at ￰9￱ expectations against what the Fed see Financial markets have already priced in a September cut and now anticipate three reductions this year, compared to two just weeks ￰10￱ Chair Jerome Powell and other policymakers have made recent remarks that they were more “open” to cutting down borrowing ￰11￱ Christopher Waller and Michelle Bowman had opposed holding rates steady in July, and economists are certain dissenting votes will also be a problem this time around.

“It’s just a very difficult policymaking environment. I wouldn’t be surprised to see more dissents,” US economist at Bank of America Stephen Juneau told Reuters. “If the Fed cuts aggressively to where they’re just leaning too much on the story, which is the labor market has significant downside risk, and they don’t have to worry about inflation upside risk. We’ll get into a situation where it’s more of a policy error.” President Trump has been criticizing Powell for not making any cuts this year, and he is headstrong in insisting that tariffs do not stoke inflation or slow down economic growth.

Powell, on the other hand, is fighting for the Fed’s independence in monetary policymaking. Trump’s nominee for a vacant Fed governorship, Stephen Miran, may not be confirmed in time for next week’s ￰12￱ Difference Wire helps crypto brands break through and dominate headlines fast