Fed Rate-Cut Expected as Policymakers Update Views on Trump’s Economic Agenda

The most politically charged meeting in years at the U.S. Federal Reserve is set to conclude on Wednesday with broad expectations of a quarter-point interest rate cut, a move that may expose divisions among policymakers. Some argue that such a cut is too small and comes too late, while others believe it is unwarranted altogether.

Alongside the decision, an updated set of forecasts will be closely watched, offering insight into how policymakers view the economy and monetary policy after eight months of President Donald Trump’s sweeping economic agenda and persistent pressure on the central bank to lower borrowing costs.

One of the Fed’s nearly certain critics will be Trump himself, who has called for far larger cuts than would typically be justified in a healthy economy—even as his influence over the central bank’s stance begins to take shape.

Amid these developments, Governor Stephen Miran, currently on leave as chair of Trump’s Economic Advisory Council, was sworn in as a Fed board member on Tuesday, just as the meeting got underway. The administration also announced it would seek permission from the U.S. Supreme Court to proceed with efforts to remove Governor Lisa Cook.

Trump previously attempted to pressure Fed Chair Jerome Powell into resigning in order to secure lower rates, before shifting focus to Cook last month, claiming she had provided false information in a mortgage application. Cook has denied any wrongdoing and faces no criminal charges, while courts have so far ruled she is likely to win and can remain in office while the case proceeds.

Against this backdrop—and amid concerns that the Fed is increasingly being drawn out of its relatively insular world into Washington’s polarized environment—policymakers will analyze the latest economic data, update their views on the economy’s direction under Trump’s influence, and release a new policy statement and economic forecasts at 2:00 p.m. ET (1800 GMT). Powell will hold a press conference at 2:30 p.m. ET.

“A Shift in the Balance of Risks”

With summer temperatures rising and labor market data softening, expectations for a quarter-point cut have been building for several weeks.

After the July meeting—when Trump-appointed governors Christopher Waller and Michelle Bowman advocated for rate cuts—two dissenting votes were recorded, and this week’s gathering may see further disagreements. Most analysts expect Miran to dissent in favor of a larger cut from the outset, with Waller and Bowman possibly joining him. At least one regional Fed president, Kansas City’s Jeffrey Schmid, is reportedly sticking to an aggressive stance even as the meeting draws near.

The forecasts released with the rate decision will also be the first to extend through the end of 2028, effectively covering Trump’s entire term. While the Fed adjusts projections based on trends and other variables, the outlook for this year and next will signal how recent data has reshaped views on inflation, unemployment, and interest rates since the forecasts released in June.

In June, the forecasts flagged concerns over rising inflation driven by Trump’s import tariffs, but subsequent data showed slower job growth than previously expected. Speaking at the Fed’s research conference in Wyoming last month, Powell suggested it was a “reasonable base case” that Trump’s new tariffs would only temporarily influence inflation, and that “adjusting policy with rate cuts may be necessary given shifting risk balances.”

Since then, data has reinforced risks to the labor market, though economic growth has continued.

Investors now expect quarter-point cuts in September, October, and December meetings, with a slower pace of cuts next year. The Fed has held rates in the 4.25%-4.50% range since December after cutting rates by a full percentage point over three meetings.

However, to justify three cuts, policymakers must account for “negative risks to the labor market” at a time when inflation is expected to rise later this year, according to Ryan Sweet, Chief U.S. Economist at Oxford Economics.

“Inflation remains a thorn for the Fed, and there are signs that tariff effects will intensify this fall,” Sweet said.

In June’s forecasts, the median policymaker projected that the Fed’s preferred inflation gauge—the Personal Consumption Expenditures price index—would remain at 3% in the fourth quarter, well above the central bank’s 2% target.