Fed under pressure to cut rates as job market cools

The US Federal Reserve opened its sixth policy meeting of the year today, Sept. 17, after keeping interest rates unchanged since the start of 2025 amid concerns over tariff fallout.

Signs of labor market weakness have revived hopes for renewed monetary easing, though questions linger over whether any move would be driven by pressure from President Donald Trump.

Long-Awaited Decision

The US Central Bank left rates steady year to date after trimming by a cumulative 100 basis points across its last three meetings in 2024. Inflation remains stuck above the 2% target, while policymakers continue to weigh the potential impact of tariffs.

Labor Market Cools

Labor market cracks have begun to show. July’s jobs report revealed fewer hires than expected, while payroll figures for the previous three months were revised lower. The data prompted Trump to dismiss the head of the Bureau of Labor Statistics.

Turning Point

A potential renewed Fed easing was a turning point in late August when Chair Jerome Powell hinted at Jackson Hole that conditions could warrant rate cuts. The following jobs report, which was weaker than forecast, reinforced that signal.

Critical Moment

Bets on a September rate cut have now reached near-certainty after the Bureau of Labor Statistics revised down employment figures for the year through March 2025 by more than 900,000 jobs.

Inflation: A Glimpse of Hope
A contraction in the Producer Price Index in August offered some relief, while annual inflation and core Personal Consumption Expenditures — the Fed’s preferred gauge — rose in line with forecasts. However, both remain above target.

Extraordinary Shifts

Since returning to the White House, Trump has stepped up pressure on the Fed to slash rates, nominating his senior economic adviser Stephen Miran to fill a vacant board seat following the surprise resignation of Adriana Kugler.

Mounting Pressure

The Trump administration intensified pressure by accusing Fed Governor Lisa Cook of mortgage fraud. Trump dismissed her, but she challenged the decision in court, which ruled she remain in her post pending the case.

Critical Question

Court rulings ensured Lisa Cook’s attendance at the current meeting, while at the same time the Republican-controlled Congress confirmed Stephen Miran’s appointment, opening the door to potential division within the Federal Open Market Committee (FOMC). The central question now is whether the Fed’s decision will be driven by politics or economics.

On The Edge
The Fed meeting leaves the US economy in the balance. A vote to cut rates would signal that labor market weakness, rather than still-elevated inflation, is the main driver — rekindling fears of stagflation.

Your Call?
With labor market fragility, persistent inflationary pressures, and Trump’s push to erode Fed independence all weighing on policy, the question remains: what would your decision be if you were sitting on the FOMC?