A recent Reuters poll of economists points to a significant shift in U.S. monetary policy, with the Federal Reserve widely expected to implement its first interest rate cut of the year on September 17. This anticipated move underscores a growing prioritization of labor market health over persistent inflation concerns, signaling a potential pivot in the central bank’s economic strategy.
The consensus among 107 surveyed economists projects a 25-basis-point reduction, lowering the federal funds rate target to a range of 4.00%–4.25%. This forecast is largely attributed to mounting evidence of a decelerating labor market, highlighted by modest job growth in August and downward revisions to employment data over the past year. Michael Gapen, Chief U.S. Economist at Morgan Stanley, emphasized this trend, stating that the Fed possesses “four months of evidence of slowing labor demand, which appears more sustainable in nature,” advocating for easing policy to bolster the labor market despite current inflation levels.
Beyond the September adjustment, financial markets are already factoring in two additional rate cuts before the end of 2025, translating to a total of three reductions – an increase from the two anticipated just weeks prior. The survey further revealed that 60% of economists foresee a cumulative 50 basis points of cuts by year-end, while 37% predict a more substantial 75 basis points, marking a sharp rise from August’s projections.
Despite Federal Reserve Chair Jerome Powell and other officials hinting at forthcoming easing, internal disagreements persist within the central bank. Governors Christopher Waller and Michelle Bowman, for instance, dissented against maintaining rates in July, signaling potential divisions in future decisions. Stephen Juneau of Bank of America cautioned against overly aggressive easing, warning of a potential “policy error” if inflation proves more resilient than anticipated.
Looking ahead, inflation is projected to remain above the Fed’s 2% target until at least 2027, even with the anticipated rate reductions. The unemployment rate, currently at 4.3%, is expected to hover near this level for several years. Over 60% of surveyed economists identify either a re-acceleration of inflation or a combination of inflation and rising unemployment as the primary economic risk to the U.S. economy over the next 12 months.
Median forecasts suggest further easing into 2026, with an additional 75 basis points in cuts potentially bringing the federal funds rate to 3.00%–3.25%. This monetary policy landscape unfolds against a backdrop of political pressure. President Donald Trump has repeatedly criticized Chair Powell for perceived inaction on rates, while his nominee for a Fed governorship, Stephen Miran, is unlikely to be confirmed before the next crucial meeting. Governor Lisa Cook, meanwhile, remains in her position after legal challenges to her removal were blocked. The Fed’s immediate challenge will be to skillfully navigate the balance between supporting a softening labor market and managing persistent inflationary pressures in the coming months.
Emily Carter has over eight years of experience covering global business trends. She specializes in technology startups, market innovations, and corporate strategy, turning complex developments into clear, actionable stories for our readers.