ENGALURU, Aug 15 (Reuters) – The US Federal Reserve is widely expected to deliver its first interest rate cut of 2025 in September, with the possibility of another reduction before year-end, according to a majority of economists surveyed in a Reuters poll.
The outlook comes amid renewed concerns over the health of the world’s largest economy. Inflation remains above the Fed’s 2% target and is expected to face further upward pressure from President Donald Trump’s tariffs, while the labor market has shown signs of strain after significant downward revisions to hiring figures.
Out of 110 economists polled, 61% (67 respondents) forecast a 25-basis-point cut at the September 17 meeting, bringing the federal funds rate down to 4.00%–4.25%. One forecaster even predicted a sharper 50-basis-point move. Meanwhile, 42 economists said the Fed would hold rates steady.
Despite futures markets pricing in near-certainty for a September cut, and a strong chance of two or even three cuts this year, many economists remain cautious. Analysts at Barclays noted that “market participants are excessively confident in a September cut, as they are misinterpreting both the FOMC’s assessment of labor market conditions and its reaction function.”
Over 60% of economists, 68 out of 110, expect one or two cuts in total this year, broadly unchanged from the previous month’s poll. However, there was little agreement on where the Fed’s benchmark rate would stand by the end of 2025. Inflation forecasts remain above the Fed’s 2% target through at least 2027, while unemployment is projected to hover around the current 4.2%. A majority also said they expect tariff-driven inflation pressures to be temporary.
On concerns about political interference, 68% of respondents said they do not foresee a significant erosion of the Fed’s independence during the remainder of Jerome Powell’s term, which ends in May.
The Fed Chair’s upcoming speech at the Jackson Hole conference later this month is expected to provide more clarity on the central bank’s direction. Powell has faced growing criticism from Trump for not cutting rates sooner, and his remarks could signal how policymakers are weighing risks between inflation control and supporting employment.
“Ultimately, the Fed wants to preserve flexibility,” said Michael Gapen, chief US economist at Morgan Stanley. “A weak August jobs report could tip the balance toward cuts, while stronger employment data paired with firm inflation could keep rates on hold.”
With global markets closely watching, September’s meeting is shaping up to be one of the most pivotal moments for Fed policy in 2025.
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