US Federal Reserve Expected to Cut Interest Rates

Washington — The US central bank is preparing to lower interest rates this week for the first time since last December, in a move aimed at supporting a slowing labor market.

The Federal Reserve is expected to announce a 0.25 percentage point cut on Wednesday, bringing its benchmark lending rate to a range of 4% to 4.25%, the lowest level since 2022. Economists anticipate further reductions in the coming months to ease borrowing costs across the economy.

The decision follows months of debate within the Fed and sustained political pressure from President Donald Trump, who has demanded more aggressive cuts. While the central bank operates independently, Trump has accused Fed Chairman Jerome Powell of dragging his feet, calling for rates to fall as low as 1%.

Despite signs of inflation edging higher, consumer prices rose 2.9% in the year to August, above the Fed’s 2% target, policymakers have shifted focus to weakness in the labor market. Job growth has slowed sharply, with modest gains in July and August and outright losses in June, the first decline since 2020.

“The deterioration in the jobs market over the past few months is central to the Fed’s decision,” said Sarah House, senior economist at Wells Fargo. Analysts at the bank expect rates to fall by as much as 0.75 percentage points by year’s end.

Other major economies, including the UK, Canada, and parts of Europe, have already cut rates as inflation cools. The Fed had signaled earlier this year that it anticipated lowering rates by at least half a point.

The move comes amid rising tensions between Trump and the central bank. The president recently installed Stephen Miran, his top economic adviser, on the Fed board and has openly threatened Powell’s position. Critics warn such actions risk undermining the Fed’s independence.

Still, most analysts agree the Fed would have acted regardless of political pressure. “The president’s jawboning of the Fed has had zero impact,” said Art Hogan, chief market strategist at B. Riley Wealth. “It’s the weakening economic data that is forcing the Fed’s hand.”

The rate cut is expected to provide some relief to borrowers and the housing market, but it also underscores the risks facing the US economy heading into 2026.