Will Fed Reduce Interest Rates in September?

A potential interest rate cut by the Federal Reserve is on the horizon as economists widely predict a reduction at their September meeting. The formal announcement of this decision is scheduled for September 17 at 9 p.m. Eastern Time. While the main focus remains on a potential 25 basis point reduction, there are ongoing discussions about further cuts by year-end.

What Do Economists Expect?

According to a Reuters poll, a significant portion of the 107 surveyed economists anticipate a 25 basis point cut from the Federal Reserve, which would adjust the target rate range to 4.00–4.25 percent. Only a small minority of respondents suggest a larger cut of 50 basis points might occur.

Factors supporting this expectation include a cooling labor market. August saw stagnation in employment figures, with recent data revisions showing a downward trend. Many economists believe the Federal Reserve is now focusing on employment stabilization over immediate inflation concerns.

What Is the Economic Outlook?

Market projections currently include the possibility of three rate cuts in the next year. Within the survey group, 60% foresee another 50 basis point reduction by year-end, while 37% predict a total cut of 75 basis points. Furthermore, there is consensus that consumer inflation will stay above the Fed’s 2% target until 2027.

Data from CME FedWatch reveals a 92.7% likelihood of a 25 basis point reduction on September 17, with a mere 7.3% chance of a larger 50 basis point drop.

Some institutions, such as Standard Chartered, suggest a 50 basis point cut due to a rising unemployment rate of 4.3% and historically weak job data.

“A stronger cut of 75 to 100 basis points would be more beneficial for growth,” President Donald Trump suggested.

Inside the Federal Reserve, disagreements persist regarding rate policy, with members previously opposed to static rates now potentially changing their stance. This internal debate could influence upcoming decisions.

– Economists foresee a sustained rate reduction process.
– By 2026, cumulative cuts of 75 basis points could bring rates down to 3.00–3.25 percent.

The anticipated Federal Reserve interest rate cuts carry significant implications for the economy, as policymakers juggle between job stabilization and inflation management. As experts project future reductions, the coming years may see rates falling further to foster economic resilience.