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Wednesday, September 17, 2025, will be a very important day for the US economy and global markets. The US central bank, the Federal Reserve (Fed), will announce its interest rate policy on this day. According to experts and market forecasts, the Federal Open Market Committee (FOMC) is very likely to announce the first interest rate cut of the year. This possible cut comes at a time when the US economy is facing two major crises, on the one hand, there are signs of a slowdown in the job market, on the other hand, inflation is rising again. In these economic equations, the huge political pressure from President Donald Trump is making this decision more complicated.
Interest rate cut by the Federal Reserve is very likely
Fed Chairman Jerome Powell will hold a press conference after the two-day meeting of Federal Reserve policymakers ends on Wednesday and inform about the decision. Most market analysts expect the FOMC to cut the benchmark federal funds rate by 0.25% (25 basis points). If this cut occurs, it will be the first rate cut since December 2024 and will bring the target range for interest rates down to 4% to 4.25%.
The market has almost priced in the possibility of this cut. According to the CME FedWatch tool, the probability of a 25-basis-point cut is 96%, while the probability of a larger 50-basis-point cut is only 4%. This clearly shows that investors and markets are expecting a smaller cut from the Fed.
The possibility of both employment and inflation crises coming together
Any policy of the Federal Reserve is based on its ‘Dual Mandate’. These are two main objectives:
-
Maximum Employment: To increase employment opportunities in the economy and keep the unemployment rate low.
-
Stable Prices: Keeping inflation under control, which the Fed has set a long-term target of 2%.
The current situation is very complicated because both of these objectives are under pressure and are pointing in opposite directions.
Job market slowdown
-
According to data released in recent months, the US job market appears to be weakening more than expected.
According to the latest report from the Bureau of Labor Statistics, only 22,000 new jobs were added in August, which is a very disappointing increase.
Previous months’ figures: July’s figures slightly improved to 79,000 jobs, but June’s figures are so low that the economy lost 13,000 jobs in the month.
Americans’ confidence in finding a new job is currently at its lowest level since the data began to be collected in 2013.
All these figures show that the economy is slowing down and companies are reluctant to hire new workers. In such a situation, reducing interest rates is considered an old and important step to stimulate the economy and promote employment.
Rising risk of inflation
While the job market is cooling, inflation is seen rising again instead of falling.
PCE index: The Fed’s preferred inflation index, Personal Consumption Expenditures (PCE), fell to 2.2% in April 2025. However, it has since started rising again and reached 2.6% in July. Core PCE (which excludes food and energy) has also increased to 2.9%. Both these figures are far from the Fed’s 2% target.
CPI index: The other important inflation index, the Consumer Price Index (CPI), rose by 2.9% annually in August, while the core CPI reached 3.1%.
Rising inflation usually signals a move to raise interest rates, as high interest rates reduce the flow of money into the market and reduce demand, which brings prices under control. However, the Federal Reserve is currently considering cutting interest rates, which could be a bold and risky move in the face of inflation.
Politics behind the decision and pressure from the Trump administration
Political pressure is considered to be as much a factor as economic reasons behind this potential Fed decision. President Donald Trump has consistently publicly criticized and pressured the Federal Reserve and its chairman, Jerome Powell, to lower interest rates. The Trump administration believes that lower interest rates will boost the economy, boost the stock market, and reduce the burden of interest on the national debt, which could benefit them in the upcoming elections.
There has also been debate among Fed policymakers about whether Trump’s trade policies, particularly the tariffs he has imposed, will increase inflation. Jerome Powell acknowledged during a discussion earlier this summer that “when tariffs raised the possibility of inflation, we had to hold off.” Now, however, the Fed appears to be forced to cut rates despite pressure from Trump and concerns about rising inflation, due to a weak job market.
Internal disagreements within the Fed
There are signs that pressure to cut interest rates is growing not only from outside, but also from within the Fed. At the July FOMC meeting, two members disagreed on the decision to keep interest rates steady. Fed Governors Michelle Bowman and Christopher Waller had recorded disagreements calling for a 25-basis-point cut. This was the first time since 1993 that two Fed policymakers had openly disagreed in favor of a rate cut. This shows that concerns about the slowing economy were also growing within the Fed.
9.2
C
New York
Wednesday, September 17, 2025, will be a very important day for the US economy and global markets. The US central bank, the Federal Reserve (Fed), will announce its interest rate policy on this day. According to experts and market forecasts, the Federal Open Market Committee (FOMC) is very likely to announce the first interest rate cut of the year. This possible cut comes at a time when the US economy is facing two major crises, on the one hand, there are signs of a slowdown in the job market, on the other hand, inflation is rising again. In these economic equations, the huge political pressure from President Donald Trump is making this decision more complicated.
Interest rate cut by the Federal Reserve is very likely
Fed Chairman Jerome Powell will hold a press conference after the two-day meeting of Federal Reserve policymakers ends on Wednesday and inform about the decision. Most market analysts expect the FOMC to cut the benchmark federal funds rate by 0.25% (25 basis points). If this cut occurs, it will be the first rate cut since December 2024 and will bring the target range for interest rates down to 4% to 4.25%.
The market has almost priced in the possibility of this cut. According to the CME FedWatch tool, the probability of a 25-basis-point cut is 96%, while the probability of a larger 50-basis-point cut is only 4%. This clearly shows that investors and markets are expecting a smaller cut from the Fed.
The possibility of both employment and inflation crises coming together
Any policy of the Federal Reserve is based on its ‘Dual Mandate’. These are two main objectives:
-
Maximum Employment: To increase employment opportunities in the economy and keep the unemployment rate low.
-
Stable Prices: Keeping inflation under control, which the Fed has set a long-term target of 2%.
The current situation is very complicated because both of these objectives are under pressure and are pointing in opposite directions.
Job market slowdown
-
According to data released in recent months, the US job market appears to be weakening more than expected.
According to the latest report from the Bureau of Labor Statistics, only 22,000 new jobs were added in August, which is a very disappointing increase.
Previous months’ figures: July’s figures slightly improved to 79,000 jobs, but June’s figures are so low that the economy lost 13,000 jobs in the month.
Americans’ confidence in finding a new job is currently at its lowest level since the data began to be collected in 2013.
All these figures show that the economy is slowing down and companies are reluctant to hire new workers. In such a situation, reducing interest rates is considered an old and important step to stimulate the economy and promote employment.
Rising risk of inflation
While the job market is cooling, inflation is seen rising again instead of falling.
PCE index: The Fed’s preferred inflation index, Personal Consumption Expenditures (PCE), fell to 2.2% in April 2025. However, it has since started rising again and reached 2.6% in July. Core PCE (which excludes food and energy) has also increased to 2.9%. Both these figures are far from the Fed’s 2% target.
CPI index: The other important inflation index, the Consumer Price Index (CPI), rose by 2.9% annually in August, while the core CPI reached 3.1%.
Rising inflation usually signals a move to raise interest rates, as high interest rates reduce the flow of money into the market and reduce demand, which brings prices under control. However, the Federal Reserve is currently considering cutting interest rates, which could be a bold and risky move in the face of inflation.
Politics behind the decision and pressure from the Trump administration
Political pressure is considered to be as much a factor as economic reasons behind this potential Fed decision. President Donald Trump has consistently publicly criticized and pressured the Federal Reserve and its chairman, Jerome Powell, to lower interest rates. The Trump administration believes that lower interest rates will boost the economy, boost the stock market, and reduce the burden of interest on the national debt, which could benefit them in the upcoming elections.
There has also been debate among Fed policymakers about whether Trump’s trade policies, particularly the tariffs he has imposed, will increase inflation. Jerome Powell acknowledged during a discussion earlier this summer that “when tariffs raised the possibility of inflation, we had to hold off.” Now, however, the Fed appears to be forced to cut rates despite pressure from Trump and concerns about rising inflation, due to a weak job market.
Internal disagreements within the Fed
There are signs that pressure to cut interest rates is growing not only from outside, but also from within the Fed. At the July FOMC meeting, two members disagreed on the decision to keep interest rates steady. Fed Governors Michelle Bowman and Christopher Waller had recorded disagreements calling for a 25-basis-point cut. This was the first time since 1993 that two Fed policymakers had openly disagreed in favor of a rate cut. This shows that concerns about the slowing economy were also growing within the Fed.
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