17 September 2025
If you are covering the Federal Reserve’s latest interest rate decision, please see the following comment from Lindsay James, investment strategist at Quilter:
“Having endured months of political pressure and insults, Jerome Powell will likely deliver today’s decision to cut interest rates with somewhat gritted teeth. However, the Federal Reserve has found itself backed into a corner, and today’s cut surely would have come regardless of the president’s campaign.
“The Fed finds itself in a difficult position, with both sides of its dual mandate moving in opposite directions. The labour market is in a more precarious position, whilst inflation is once again on the rise. Until sharp data revisions by the Bureau of Labour Statistics prompted Powell to highlight a ‘shifting balance of risks’, this cut was seen as hanging in the balance. However, the decline in job creation that has seen payrolls revised down by 911,000 in the year to March has highlighted that cracks are emerging in the US economy, and the Fed clearly feels it warrants action. For now, unemployment remains relatively stable, but this is the result of lower growth within the labour force – due in part to the new stance on immigration, leaving the labour market in a ‘curious kind of balance’, to use the words of the Fed Chair.
“While the Fed has finally given in and cut rates for the first time since December, taking rates to the lowest level since late 2022, Trump will not yet be satisfied. He has repeatedly called for far deeper cuts, and that pressure is unlikely to let up. He has made no secret of his want for a more compliant central bank, and today’s cut may just add fuel to that fire. While he has made his views clear, the Committee still remains majority independent. Governor Kugler’s hurriedly appointed replacement, Stephen Miran, is effectively on a four-month secondment from his role as a White House economic adviser and was the only member of the committee to vote for a larger 0.5% rate cut. Alongside Governors Bowman and Waller, appointed by the president in his first term, the three Trump appointees remain the minority on the 12 strong committee. However, should Governor Cook lose her legal case and subsequently her job, this independence may yet be called into question.
“Nonetheless, the monetary policy committee continues to stress its data-driven approach for now, and the prospect of resurgent inflation remains a risk. Core PCE inflation – the measure targeted by the Fed – has risen from 2.6% in April to 2.9% in July. Lower interest rates could serve to further stoke this, as could the still unclear impact from tariffs. Markets are currently pricing in another one to two quarter point cuts by year end, but only time will tell.”
