In a sign of shifting priorities at the world’s most powerful central bank, the U.S. Federal Reserve is expected to cut interest rates twice more before year-end, a move analysts say reflects mounting concern over a slowing job market despite persistent inflation.
According to a survey, out of 117 economists, 115 expect the Fed to lower rates by 25 basis points next week, bringing the target range to 3.75%–4.00%, while about 71% see another quarter-point cut in December.
The findings suggest a faster pace of monetary easing than previously projected, as the Fed seeks to cushion the U.S. economy against weakening employment data and geopolitical risks.
Last month’s quarter-point reduction was the first rate cut since December, signaling a policy pivot after nearly two years of restraint.
The move came as inflation, still above target, collided with slowing business confidence and fragile labour data.
READ ALSO: Powell Weighs Fed’s Next Move as U.S. Economy Faces Growth, Job, Inflation Tensions
The Fed’s dilemma is clear: inflation remains stubbornly above its 2% target, yet labour demand is cooling faster than expected. Chair Jerome Powell and the Federal Open Market Committee (FOMC) now face the challenge of balancing price stability with job protection, a balancing act complicated by a three-week U.S. government shutdown that has delayed key economic data on employment and consumer prices.
“About half of the FOMC is fixated on labour market weakness, while the other half is worried about inflation risks,” said Ryan Wang, U.S. economist at HSBC. “The lack of fresh data makes it hard to judge which risk deserves greater attention.”
Private-sector data show a subdued job market, with hiring slowing but large-scale layoffs remaining limited. Economists in the poll expect unemployment to hover around 4.3% through 2027, while inflation is projected to stay slightly above 2%, reinforcing the view that the Fed’s tightening cycle has already peaked.
Markets and Investors Take the Cue
Financial markets have fully priced in two more cuts this year, reflecting growing investor confidence that the Fed will prioritize growth support. Lower borrowing costs could ease financing pressures on small businesses, mortgage borrowers, and corporate debt issuers already squeezed by elevated rates.
Still, the direction beyond 2025 remains murky. Economists were split seven ways on where rates would stand by the end of 2026, with projections ranging from 2.25% to 4.00%. Much of the uncertainty stems from speculation over who will succeed Powell when his term ends in May 2026, and how the next chair will steer policy amid political pressure.
“The risk is that the Fed cuts too far, too soon,” warned Brett Ryan, senior U.S. economist at Deutsche Bank. “If that happens, it could reignite inflation and raise concerns about the Fed’s independence already under strain from political interference.”
President Donald Trump has renewed calls for steeper rate cuts, arguing that tight monetary policy threatens U.S. growth. His public pressure campaign on Powell has stirred unease across Wall Street, reviving debates over the Fed’s independence ahead of the 2026 presidential election cycle.
A separate survey found that 76% of economists view the bigger risk in this policy cycle as cutting rates too low, potentially undermining inflation control and weakening the dollar’s global standing.
READ ALSO: Fed Confronts Policy Uncertainty as Data Blackout Clouds U.S. Economic Outlook
For the business community, the prospect of further rate reductions brings mixed fortunes. On the one hand, lower interest rates will reduce borrowing costs and stimulate investment. On the other hand, the uncertainty over how far the Fed will go could weaken investor confidence and fuel market volatility.
Analysts say sectors such as real estate, manufacturing, and technology all heavily reliant on credit, stand to gain from cheaper financing. But with inflation projected to hover above target through 2027, companies must brace for continued input cost pressures and currency fluctuations.
“The next six months will define the Fed’s credibility,” said a New York-based asset manager. “It’s walking a tightrope between political demands and economic realities.”
For now, the Fed appears committed to a gradual easing path, hoping to sustain growth without reigniting inflation. But the lack of reliable economic data—due to the ongoing government shutdown, leaves policymakers navigating with limited visibility.
As the world watches Washington’s next move, the stakes are high: a misstep could ripple across global markets, affecting everything from commodity prices to emerging-market currencies.
For American households and businesses, however, the message is simpler cheaper loans may be coming, but economic certainty is not.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
