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<\/p>\nWhile inflation remains above the Fed’s 2% target, economists expect a rate cut this September to address the weakening labor market.<\/p>\n
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Powell signals possible Fed rate cut in September<\/p>\n
Federal Reserve Chair Jerome Powell opened the door to a September interest rate cut, asserting that \u201cdownside risks to employment are rising.\u201d<\/p>\n
After nine months of holding its key interest rate steady<\/a>, the Federal Reserve is widely expected to announce a rate cut after its two-day September meeting. \u00a0<\/p>\n The central bank\u2019s decision, to be announced Sept. 17, follows months of President Donald Trump<\/a> browbeating Fed Chair Jerome Powell for lower rates. While Trump\u2019s name-calling<\/a> failed to sway the Fed, a string of disappointing job market reports may have been enough to finally do the trick.\u00a0<\/p>\n \u201cThe fourth month of sub-par employment performance signals a dramatic stall in hiring and fully supports the Fed starting rate cuts at the next meeting,\u201d Nationwide Chief Economist Kathy Bostjancic said in a Sept. 5 note.<\/p>\n The “real question now,” she said, is how many rate cuts will follow.<\/p>\n Why would the Fed want to cut interest rates?\u00a0<\/p>\n The Fed is tasked with maintaining maximum employment and low inflation. \u00a0<\/p>\n When the labor market is weak, cutting interest rates can make borrowing costs cheaper for businesses and consumers, which can juice the economy and promote hiring. When consumer prices are surging, the central bank can raise rates to cool economic activity and ease inflation.\u00a0\u00a0<\/p>\n The dilemma the Fed has faced this year is that tariffs are expected to both curb growth and raise consumer prices, leaving the central bank torn between its dual mandate.<\/p>\n Why is the Fed expected to cut rates now?\u00a0<\/p>\n The U.S. economy added just 22,000 jobs<\/a> in August as companies grapple with new trade, immigration and federal layoff policies, according to Bureau of Labor Statistics data. The unemployment rate rose to the highest level since October 2021, and revisions revealed the U.S. shed 13,000 jobs in June, the first month of job losses since December 2020.\u00a0<\/p>\n The findings follow a disappointing July report<\/a> that revealed a dramatic downward revision for employment gains in May and June. Powell signaled that the Fed was open<\/a> to rate cuts shortly after the report was released.\u00a0\u00a0\u00a0<\/p>\n