Federal Reserve Poised for Rate Cut Amidst Unprecedented Political Scrutiny

The Federal Reserve concludes its pivotal two-day policy meeting today, with central bankers widely expected to announce their first interest rate cut since December. This move aims to bolster America’s slowing labor market amidst an extraordinary backdrop of political pressure and internal board controversies, particularly concerning the potential limited impact of President Donald Trump’s tariffs on inflation.

Adding to the unprecedented nature of this gathering is President Trump’s aggressive push to reshape the Fed’s leadership. Just this Monday, the Senate confirmed Stephen Miran, a close economic adviser to Trump, to the Fed’s Board of Governors. Sworn in Tuesday morning, Miran is casting a vote in this week’s crucial meeting, despite concerns raised by Democrats over his close ties to the administration and his reluctance to commit to resigning when his term expires in January if a successor isn’t named.

Also participating is Fed Governor Lisa Cook, who faced an unprecedented attempted firing by President Trump in late August. An appeals court blocked Trump’s removal order on Monday, allowing Cook to remain and cast her vote as her lawsuit challenging the action proceeds.

The primary driver for the anticipated rate cut is a significant weakening in the labor market. Job growth this summer has been anemic, with an average of only 29,000 jobs added in the three months ending August, marking one of the weakest paces in over a decade. Further indicators of distress include a rise in jobless benefit applications to a nearly four-year high by September 6, and the highest number of long-term unemployed individuals since November 2021. This deterioration, coupled with the Fed’s growing conviction that tariff-induced inflation will be temporary, has paved the way for lowering borrowing costs.

While inflation, largely influenced by Trump’s tariffs, has seen a recent uptick—the Consumer Price Index rose 2.9% in August—Fed officials increasingly view these price increases as temporary. Statements from regional Fed presidents, including Mary Daly and Alberto Musalem, suggest that tariff effects are expected to dissipate by early 2026. A softening labor market and broader economic uncertainties are also limiting businesses’ ability to pass on higher costs, reinforcing the view that inflation will not become entrenched.

This week’s meeting unfolds amidst an intensified pressure campaign by the Trump administration against the Fed’s traditional independence. Since the start of his second term, President Trump has repeatedly criticized the central bank for not lowering rates sooner, even reportedly threatening to fire Chair Jerome Powell earlier this year. The administration also leveraged a $2.5 billion renovation of the Fed’s headquarters in July to accuse Powell of mismanagement. The ongoing legal battle over Governor Cook’s attempted removal, coupled with the swift, politically charged confirmation of Stephen Miran, underscores Trump’s desire to reshape the Fed’s board with appointees aligned with his push for lower rates. Despite these pressures, a quarter-point rate cut is overwhelmingly anticipated by Fed watchers, signaling a significant shift in monetary policy.

阅读中文版 (Read Chinese Version)

Disclaimer: This content is aggregated from public sources online. Please verify information independently. If you believe your rights have been infringed, contact us for removal.