The U.S. Federal Reserve is widely expected to cut its benchmark interest rate by 25 basis points at its September meeting, ending a steady rate range of 4.25%–4.50% that has held since December.
This move is fueled by notably softer job-market data, even as inflation remains a persistent concern.
U.S. President Donald Trump has openly pushed for much deeper rate cuts, contending that current rates are too high given the economy’s condition, though many Fed officials and analysts believe the quarter-point is the appropriate adjustment under the circumstances.
Alongside the rate decision, the Fed will release updated economic projections through the end of 2028, covering growth, inflation, unemployment, and the expected path of future interest-rate policy.
These projections will reflect how recent data, slower hiring, and revised employment numbers have reshaped views since the prior projections in June.
U.S. Inflation, especially stemming from import tariffs, remains above the Fed’s 2% target; in the June projections, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, was projected at 3% in the fourth quarter.
Fed Chair Jerome Powell has described the impact of tariffs as likely temporary, and noted that the “shifting balance of risks may warrant adjusting our policy stance.”
Yet, the U.S. job-market data have repeatedly shown downside risk. With employment growth slowing and some sectors weakening, the Fed will likely need to “lean into the downside risk to the labor market” to justify further cuts.
Analysts warn that inflation could accelerate again later this year, complicating policy.
What the Markets & Analysts Are Betting On
Markets have broadly priced in the quarter‐point cut. Many analysts expect additional cuts in the October and December meetings, though the pace in 2026 may be slower.
According to a Reuters economists poll, nearly all respondents see the rate cut in September, with most expecting at least one additional reduction before year-end.
Oxford Economics’ Chief U.S. Economist Ryan Sweet cautioned: “Inflation remains a thorn in the Fed’s side and there are signs that the pass-through from tariffs will intensify this fall.”
What to Watch at the 2 p.m. EDT Decision & Powell’s Press Conference
The Fed’s policy statement and Summary of Economic Projections, expected at 2 p.m. EDT, will be critical.
Observers will scrutinize the projections for signals of potential rates in 2026-2028, as well as updated views on inflation and labor market slack.
Fed Chair Powell’s press conference at 2:30 p.m. will be watched for clues to how the Fed plans its rate path, how it balances inflation vs employment risks, and whether the Fed’s independence remains intact in the face of political pressure.