The Federal Reserve is considering cutting interest rates in September 2025. These potential changes are linked to current economic conditions and weakness in the labor market.
Current Situation Overview
The Fed has paused any interest rate reductions since January 2025 after initiating a 50 basis point cut last September. The decision, influenced by tariff volatility caused by actions of President Donald Trump, has held rates steady until now.
Expert Opinions and Predictions
According to a Reuters poll, 105 out of 107 economists surveyed predict the Fed will cut interest rates by 25 basis points on September 17. Only two economists expect a 50 basis point reduction. They also forecast another rate cut in the next quarter, estimating that the total cuts this year could reach three.
Key expert Michael Gapen, Chief U.S. Economist at Morgan Stanley, stated: “The Fed now has four months of evidence of a slowdown in labor demand, and that slowdown looks more persistent... In short, ignore where inflation is today and ease policy to support the labor market. At this point, we think a 25 basis point rate cut in September is more likely.”
Future Expectations
Economists also noted that employment growth stalled in August, and a sharp decline in employment data for the 12 months ending in March has led many to revise their forecasts to include larger interest rate cuts than previously thought.
The Federal Reserve is on the brink of potential interest rate cuts, reflecting the current economic state, and the coming months may bring additional shifts in financial policy.
