Fed Poised for September Rate Cut Amidst Weak Jobs, Favorable Inflation, and Trump Pressure

As the Federal Reserve’s next policy meeting approaches in September, market sentiment and recent economic data strongly indicate a high likelihood of an interest rate cut. Economists widely predict a quarter-point reduction, marking the first adjustment in eight months, driven by a cooling labor market and a favorable inflation report.

Earlier this month, a weak jobs report for July revealed a significant slowdown, with employers adding an average of just 35,000 jobs over three months. This has raised concerns among central bankers about a potential economic slowdown, prompting calls for a reduction in borrowing costs.

Further bolstering the case for a cut, a fresh inflation reading released this week came in lower than expected, rebuking policymakers’ fears of a price spike. While core inflation has shown a slight uptick, overall inflation remains steady and less than a percentage point above the Fed’s 2% target, providing the central bank with the necessary data to consider easing monetary policy.

The anticipation of a rate cut is reflected in futures markets, where investors are pegging the chances of a quarter-point reduction at nearly 96%, according to the CME FedWatch Tool. This comes despite months of the Fed resisting pressure, particularly from President Donald Trump, who has consistently called for lower rates to boost economic performance.

President Trump recently renewed his criticism of Fed Chair Jerome Powell, urging him to “NOW lower the rate” via social media after the positive inflation report. While the Fed maintains its independence, economists acknowledge that the persistent political pressure, coupled with evolving economic indicators, could sway the decision towards a rate cut next month.

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