Federal Reserve Expected to Cut Interest Rates Wednesday

The Federal Reserve is expected to cut interest rates for the first time this year Wednesday afternoon.

The decision, which will be announced at 2 p.m. ET, comes as the central bank faces challenges on multiple fronts, from unprecedented attacks on its independence to an uneasy economy with experts split on whether a cut is even appropriate right now.

the labor market appears to be slowing dramatically. August’s jobs report showed that just 22,000 jobs were added, far below the expectations of economists. That report also showed that the U.S. lost jobs in June. So far this year, the economy has added 598,000 jobs, compared with 1.4 million for the first eight months of 2024. The unemployment rate also ticked higher last month to 4.3%, a level not seen since September 2017 outside of the Covid-19 pandemic.

Lower rates could help businesses hire as it becomes less expensive to take out loans,and credit card rates fall for consumers.

At the same time, inflation has been creeping up. Since April, when President Donald Trump announced his sweeping so-called “reciprocal” tariffs, inflation has increased from 2.3% to 2.9% in August. The Fed’s inflation target is 2%.

Typically, a central bank would raise rates to push inflation down, but signs of cracks in the labor market could cause Fed officials to lean toward cutting rates. The Fed’s primary rate is currently set at 4.25% to 4.50%.

“With the conflict between inflation risks on the upside and employment risks on the downside, we expect Chair Powell repeats that policy is not on a preset course and is data dependent,” economists at Morgan Stanley said on Friday. They also said they expect Powell will chart a course for “gradual,cautious” rate cuts.

Goldman Sachs economists agreed. “After weak July and August employment reports and a large negative preliminary benchmark revision job growth now appears to be much lower and below the breakeven rate, the risks still tilt toward further negative revisions, the unemployment rate has risen slightly for two months in a row, and our broader meas

Publication Date: 2025/09/17 10:24:21