The Fed is poised for its first 2025 rate cut. Trump’s pressure, weak jobs, sticky inflation and a split dot plot raise stakes for future moves.

Fed prepares first 2025 rate cut under Trump’s growing pressure

The Federal Reserve is preparing for its first rate cut of 2025 this week, but the key question for investors is whether it will be the start of a longer series of monetary easing.

First cut — and uncertainty ahead

The Fed is expected to cut rates by 25 basis points on Wednesday, its first since December last year. But markets are closely watching an updated “dot plot” chart that will show policymakers’ plans for the rest of the year.

The previous forecast in June called for two cuts in 2025. The question now is whether there will be another cut by the end of the year or whether policy will become more aggressive due to the weak labor market.

White House Pressure

President Donald Trump has been actively pressuring the Fed, accusing Jerome Powell of acting too slowly. He even tried to remove Governor Lisa Cook, but the courts blocked that effort. Instead, Stephen Miran, his White House adviser, joined the board, raising concerns about the central bank’s independence.

“The president wants to see most of his people on the board and a sharp rate cut,” said former Cleveland Fed President Loretta Mester.

How many more cuts?

Economists are divided on their forecasts:

• Morgan Stanley expects a series of cuts at every meeting through January, taking the rate to 3.5%.
• Wilmington Trust’s Luke Tilley predicts six consecutive cuts, three by the end of the year and three more in early 2026, with the goal of reaching a “neutral level” of 2.75%-3%.
• Others, like Esther George, point to the danger of inflation freezing at 3% and advise a more cautious approach.

Risks to the economy

The labor market added just 22,000 new jobs in August, compared with an expected 75,000, and unemployment rose to 4.3%. Analysts warn that if the trend continues, the chances of a recession will reach 50%.

The Fed is caught between two fires: slowing inflation is not falling below 3%, and the labor market is signaling weakness. Therefore, the Board’s decision could mark the beginning of a difficult balance between the risk of recession and the danger of inflation inertia.