Economists are anticipating a 25 basis point cut in interest rates by the Federal Reserve at their meeting in September. The interest rate decision will be officially announced on September 17 at 9 p.m. Eastern Time. There are also discussions regarding the potential for additional rate cuts by the end of the year.
Growing Consensus on Fed’s Modest Rate Cut
A survey conducted by Reuters shows that a large majority of the 107 economists surveyed expect the Federal Reserve to cut interest rates by 25 basis points at their September meeting. This move would bring the target rate range down to 4.00–4.25 percent. Only two economists in the survey believe that a more substantial 50 basis point cut is possible.
The expectation for this rate cut is further supported by a slowdown in the labor market. Employment remained stagnant in August, with revisions to the past 12 months’ data showing a downward trend. Economists note that the Federal Reserve appears to be prioritizing employment conditions over inflation in light of these developments.
Anticipated Rate Cuts and Economic Outlook
Markets are currently considering the possibility of three rate cuts next year. Meanwhile, 60% of economists surveyed expect at least an additional 50 basis point reduction by the end of the year, with 37% foreseeing a total cut of 75 basis points. Participants also believe that consumer prices will remain above the Federal Reserve’s 2% target until 2027.
Data from the CME FedWatch indicate a 92.7% probability of a 25 basis point cut by the Federal Reserve on September 17, and a 7.3% probability of a 50 basis point cut.
Outside of the surveyed experts, other institutions and figures have differing expectations. Standard Chartered points to a rise in the unemployment rate to 4.3% and the weakest employment data in four years, projecting a 50 basis point cut.
In the political arena, President Donald Trump has called for a stronger cut of 75 to 100 basis points. Within the Federal Reserve itself, there are known divisions among members regarding interest rate policy. Members who previously opposed static rates may vote in a different direction at the September meeting.
Overall, economists predict that the Federal Reserve’s rate reduction process could extend into the coming years. An additional easing of 75 basis points is anticipated by 2026, potentially bringing interest rates down to a range of 3.00–3.25 percent.
