The U.S. Federal Reserve is set this week to announce its first interest rate cut of 2025, amid growing political pressure and increasing concerns about a slowing labor market. Investors are closely watching the two-day monetary policy meeting, with widespread expectations of a 25 basis-point reduction.
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The Fed has maintained the target range at 4.25%–4.50% since the last rate cut in December 2024, monitoring the effects of the broad tariffs imposed by President Donald Trump on inflation. However, recent employment data have shown a significant slowdown in the labor market, prompting analysts to anticipate the start of a new easing cycle.
Internal Divisions at the Fed
The U.S. central bank has faced internal turbulence in recent months after Trump attempted to dismiss several key governors. He removed Governor Lisa Cook in August 2025 over allegations linked to a mortgage scandal, but she successfully contested her dismissal in court and remains in her position. Governor Adriana Kuglar also resigned in the same month, prompting Trump to nominate his senior economic advisor Stephen Miran for the vacant post, despite Democratic criticism over his close ties to the administration.
These developments raise questions about the Fed’s independence, especially with the possibility of a broad reshuffle of the Board of Governors, historically viewed as insulated from political pressures.
Markets Eye Powell’s Remarks
Investors are closely monitoring Fed Chair Jerome Powell for guidance on the future path of monetary policy. While expectations suggest the upcoming rate cut will mark the beginning of a gradual easing cycle, inflation remains a key challenge. August data showed the Consumer Price Index (CPI) at 2.9%, the highest level so far this year.
Reports from Wells Fargo warn that the U.S. labor market is fragile, with near-stagnant job growth and unemployment exceeding “full employment” estimates, increasing the risk of a recession.
Analysts note that markets may not fully price in the risks to the Fed’s independence, as investors await clarity on the level of internal division over the expected rate cut and whether it could signal a more aggressive easing path in future meetings.
(Agence France-Presse)
