Fed expected to cut rates this week amid mounting pressure by Trump

Divisions among officials over cuts as they grapple with jobs data, stubborn inflation

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The Federal Reserve is poised to resume cutting interest rates for the first time in nine months as it grapples with a slowing labour market, stubborn inflation and an unprecedented push by US President Donald Trump for lower borrowing costs.

A cut this week, however, will not necessarily set the Fed on a smooth glide path to lower rates.

A string of disappointing data is fanning worries that the US labour market could tip into a more serious slowdown, and drag with it consumer spending and economic growth. But inflation is still above the Fed’s 2 per cent target and could yet be driven higher by tariffs. That is making some policymakers wary of moving too fast.

Typically, an initial move like the one expected on Sept 17 marks the beginning of a rate-cutting or rate-hiking cycle, said Mr Pat Harker, who served as president of the Philadelphia Fed until June.

This time, “it’s not obvious that’s going to happen here in a robust way”, he said.

Divisions among Fed officials over what to do next could result in multiple dissents, with some favouring no rate cut and others calling for a larger move. It could mark the first Fed meeting since 2019 with three dissents, or even the first since 1990 with four.

Policymakers are juggling the increasingly high-stakes moment for the US economy as they confront heightened pressure from a White House seeking more influence over the central bank.

Mr Trump, who has been putting pressure for months on Fed chair Jerome Powell to cut rates and repeatedly called on him to resign, predicted a “big cut” this week.

“T think you have a big cut? Mr Trump told reporters on Sept 14 on his way back to Washington. “It’s perfect for cutting.”

Mr Trump in August attempted to fire Fed governor Lisa Cook, a move that has been temporarily blocked in the courts.