The US Federal Reserve is widely expected to resume monetary policy easing on Wednesday as the central bank seeks to rebalance its dual mandate of maximum employment and stable prices.
A poll of economists predicted that the Federal Open Market Committee (FOMC) will cut its policy rate by 25 basis points to a range of 4.00–4.25% on 17 September.
The anticipated cut and likely subsequent moves appear warranted against the backdrop of a flagging labour market.
Marc Giannoni of Barclays said the committee presumably judged that downside risks to employment have continued to mount given the weaker-than-expected pace of payroll gains, while acknowledging that inflation, albeit moderate, is still rising.
Economists pointed out that data since the July FOMC meeting have indicated that the US hiring rate has clearly downshifted. After averaging 123,000 per month between January and April, employment growth has slowed to 27,000 per month from May to August.”
The latest nonfarm payrolls report underscored the weakness: just 22,000 jobs were created in August, well short of the 75,000 consensus. The unemployment rate rose to 4.3%, while wage growth slowed to 3.7% y/y from 3.9%.
Inflation, by contrast, is broadly tracking expectations. Headline CPI rose 2.9% y/y in August, two-tenths higher than the prior month, while core inflation held steady at 3.1%.
Political headwinds
Political pressure on the Fed hierarchy has also coloured the debate. President Donald Trump has been relentless in calling for Chairman Jerome Powell to step down, accusing him of costing the country billions by not cutting rates sooner. Powell, whose tenure ends next year, looks unlikely to be reappointed as Trump continues to fill vacancies with his own nominees.
One such appointee, Stephen Miran was confirmed by the US Senate on Monday, in a narrow 48–47 vote. He will serve on the Federal Reserve Board of Governors, filling the vacancy left by Adriana Kugler, who stepped down in August.
Michael Gapen of Morgan Stanley said Miran has supported the Trump administration's view that policy rates should be substantially lower, potentially by as much as 3 percentage points. “We thus expect him to dissent in favour of a significantly larger rate cut.
“We also expect Governor [Lisa] Cook to be allowed to participate at the meeting and vote, although we would expect her to vote with the majority.”
Updated projections
September’s Summary of Economic Projections (SEP) will give investors fresh forecasts. Barclays said it anticipates little change overall, aside from upward revisions to real GDP growth and a small downward tweak to 2025 inflation.
“We expect the median dots to show three 25bp cuts this year, to 3.6%, one cut in 2026 and one in 2027, as well as an unchanged longer-run dot at 3.0%,” the bank said, adding this would bring the Fed closer to market expectations.
Powell’s challenge
With a September cut fully priced in, focus will shift to the policy statement, dot plot, and Powell’s press conference. Investors have heard little from him since Jackson Hole, where he flagged the possibility of easing.
Morgan Stanley’s Gapen said: “We expect policy guidance to suggest a new easing bias as the FOMC considers ‘the extent and timing of additional reductions’ to the policy rate. The prior statement had not shown a policy bias, instead referring more broadly to adjustments to the funds rate.”
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- Economists expect 25bp cut in range to 4.00–4.25%
- Weak August payrolls underscore labour market slowdown
- Trump pressure adds political strain on Powell
- SEP, dot plot and Powell’s remarks to set tone for path ahead
By Harry Daniels
LiveSquawk News
@HarryDaniels71
16 September 2025 | 10:00 GMT
The US Federal Reserve is widely expected to resume monetary policy easing on Wednesday as the central bank seeks to rebalance its dual mandate of maximum employment and stable prices.
A poll of economists predicted that the Federal Open Market Committee (FOMC) will cut its policy rate by 25 basis points to a range of 4.00–4.25% on 17 September.
The anticipated cut and likely subsequent moves appear warranted against the backdrop of a flagging labour market.
Marc Giannoni of Barclays said the committee presumably judged that downside risks to employment have continued to mount given the weaker-than-expected pace of payroll gains, while acknowledging that inflation, albeit moderate, is still rising.
Economists pointed out that data since the July FOMC meeting have indicated that the US hiring rate has clearly downshifted. After averaging 123,000 per month between January and April, employment growth has slowed to 27,000 per month from May to August.”
The latest nonfarm payrolls report underscored the weakness: just 22,000 jobs were created in August, well short of the 75,000 consensus. The unemployment rate rose to 4.3%, while wage growth slowed to 3.7% y/y from 3.9%.
Inflation, by contrast, is broadly tracking expectations. Headline CPI rose 2.9% y/y in August, two-tenths higher than the prior month, while core inflation held steady at 3.1%.
Political pressure on the Fed hierarchy has also coloured the debate. President Donald Trump has been relentless in calling for Chairman Jerome Powell to step down, accusing him of costing the country billions by not cutting rates sooner. Powell, whose tenure ends next year, looks unlikely to be reappointed as Trump continues to fill vacancies with his own nominees.
One such appointee, Stephen Miran was confirmed by the US Senate on Monday, in a narrow 48–47 vote. He will serve on the Federal Reserve Board of Governors, filling the vacancy left by Adriana Kugler, who stepped down in August.
Michael Gapen of Morgan Stanley said Miran has supported the Trump administration's view that policy rates should be substantially lower, potentially by as much as 3 percentage points. “We thus expect him to dissent in favour of a significantly larger rate cut.
“We also expect Governor [Lisa] Cook to be allowed to participate at the meeting and vote, although we would expect her to vote with the majority.”
September’s Summary of Economic Projections (SEP) will give investors fresh forecasts. Barclays said it anticipates little change overall, aside from upward revisions to real GDP growth and a small downward tweak to 2025 inflation.
“We expect the median dots to show three 25bp cuts this year, to 3.6%, one cut in 2026 and one in 2027, as well as an unchanged longer-run dot at 3.0%,” the bank said, adding this would bring the Fed closer to market expectations.
With a September cut fully priced in, focus will shift to the policy statement, dot plot, and Powell’s press conference. Investors have heard little from him since Jackson Hole, where he flagged the possibility of easing.
Morgan Stanley’s Gapen said: “We expect policy guidance to suggest a new easing bias as the FOMC considers ‘the extent and timing of additional reductions’ to the policy rate. The prior statement had not shown a policy bias, instead referring more broadly to adjustments to the funds rate.”