The Federal Reserve is poised to deliver its first rate cut of 2025 on Wednesday, even as policymakers weigh the inflationary impact of new tariffs and lackluster labor market data, according to Fox Business. The Federal Open Market Committee is expected to trim rates by 25 basis points, the first cut since December 2024, bringing the target range down to 4.00 to 4.25 percent. Markets have already priced in the move, with the CME FedWatch tool showing a 96 percent probability of a quarter-point cut with just 4 percent odds of a deeper half-point reduction.
Tomorrow at 2:30 p.m. ET: Chair Powell hosts live #FOMC press conference: https://t.co/fXt6ew9fZ8 pic.twitter.com/m1O41X104R
— Federal Reserve (@federalreserve) September 16, 2025
I expect Jerome Powell to (finally) cut by 0.25% tomorrow. That's too little, too late from Too Late. The real question is what the Fed signals for its last two meetings of the year. Will they signal two more cuts? And might those cuts be larger than 0.25%? I sure hope so,… pic.twitter.com/0RmqHvCNTb
— James Fishback (@j_fishback) September 16, 2025
Since the spring, the personal consumption expenditures (PCE) index, which the Federal Reserve uses to gauge inflation, has increased away from its 2 percent target. Since April, when PCE inflation dropped to 2.2 percent, and core PCE fell to 2.6 percent, both measures have climbed, with headline PCE rising to 2.6 percent in July and core PCE ticking up to 2.9 percent.
Another popular measure of inflation, the consumer price index (CPI), rose in August to 2.9 percent from last year, with core CPI up 3.1 percent.
Recent Bureau of Labor Statistics reports also pointed to weakening job growth, with August seeing only 22,000 jobs added. July was revised slightly higher to 79,000, and June was revised down to show a loss of 13,000 jobs.
Fed Chair Jerome Powell explained that in cases, policymakers weigh whether labor markets or inflation is further from target and prioritize rates that may improve the measure in greater distress. Specifically, the weak jobs report pushed Powell to cut rates, even as he acknowledged signs of rising inflation, normally a factor that would argue against easing.
President Trump has been calling on Powell to cut rates for months, even toying with the idea of ousting the Fed chair. Now, with the economy flashing signs of weakness beyond only inflation, Powell’s move may hand Trump the monetary easing he has long demanded.