Topline
The Federal Reserve on Wednesday will conclude a two-day policymaking meeting and release a decision on whether to lower interest rates—following months of pressure and criticism from President Donald Trump—and potentially signal whether additional cuts are on the way.
President Donald Trump has urged the central bank to “CUT INTEREST RATES, NOW, AND BIGGER” than they might plan to.
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Key Facts
The central bank is poised to cut interest rates by at least a quarter-point, down from the 4.25% to 4.5% range where they have been held since December to between 4% and 4.25%, as Wall Street has placed 100% odds of a rate cut, according to CME’s FedWatch, with higher odds (94%) on a quarter-point cut than a half-point (6%) reduction.
Fed governors Christopher Waller and Michelle Bowman, both Trump appointees, voted in July for a quarter-point reduction to rates, and they may dissent again in favor of a large cut alongside Stephen Miran, Trump’s Council of Economic Advisers’ chair, who was sworn in at the meeting’s start on Tuesday.
It’s unclear whether other policymakers, including Kansas City Fed President Jeffrey Schmid and St. Louis Fed President Alberto Musalem, will favor larger cuts or opt for no reduction.
Fed Chair Jerome Powell said in his Jackson Hole, Wyoming, address last month the central bank would likely consider a looser monetary policy, noting the “shifting balance of risks” on the U.S. economy “may warrant adjusting our policy stance.”
David Mericle, an economist for Goldman Sachs, wrote in a note the “key question” for the Fed’s meeting is whether policymakers signal “this is likely the first in a series of consecutive cuts” as the central bank is anticipated to “acknowledge the softening in the labor market,” though they may not “nod to an October cut.”
Mericle said he expects the Fed to anticipate two rate cuts for the year, instead of three, “though by a narrow margin.”
What Has Donald Trump Said About Lowering Interest Rates?
Trump has repeatedly accused Powell of being “TOO LATE” to lower interest rates, writing on Truth Social Monday, “[Powell] MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND.”
What Has The Fed Said About Lowering Interest Rates?
The Fed has planned for up to two 25-basis-point interest rate cuts by the end of the year. The Fed’s Federal Open Market Committee’s July meeting indicated “almost all” policymakers thought it was “appropriate” to keep rates between their current range, as Powell indicated the Fed would continue monitoring incoming data on jobs and inflation. The Fed adheres to a dual mandate of full employment and stabilized prices—inflation has remained above the central bank’s goal of 2%, worsening as expected to 2.9% in August, while unemployment ticked up to 4.3% with far fewer jobs added than projected.
Tangent
Fed Governor Lisa Cook remained on the central bank’s policymaking panel this week, after an appeals court dismissed Trump’s bid to sack her. Trump previously called for Cook’s resignation after Federal Housing Finance Agency Director Bill Pulte accused her of mortgage fraud, after she allegedly designated two properties as her primary residence. Cook has denied the claims, telling Forbes in a statement she had “no intention of being bullied to step down from my position because of some questions raised in a tweet.” The White House has stated that it will appeal the ruling.