Washington, Sept. 10 – The Federal Reserve is set to lower its benchmark interest rate by 25 basis points during its upcoming policy meeting on September 18, signaling a continued pivot toward monetary easing after a surprise rate cut in August. The move, widely expected by economists and markets, is part of a broader shift aimed at sustaining U.S. economic momentum amid slowing inflation and weakening industrial activity.
This upcoming reduction follows a bold 50 basis point cut last month—its first interest rate decrease in four years. That decision took markets by surprise and marked a significant reversal from the tightening cycle that had defined much of the Fed’s recent policy stance. Economists now anticipate the central bank will enact at least two additional cuts before the end of 2024.
Polling Reveals Widespread Expectations for Easing
A recent Reuters poll conducted from September 6 to 10 found that the vast majority of economists surveyed—92 out of 101—expect a quarter-point cut this month. A substantial portion also projects similar 25 bp cuts in November and December, which would result in a total reduction of 75 basis points for the final quarter of the year.
Analysts note that this trajectory aligns with emerging macroeconomic trends. Inflation has moderated, approaching the Fed’s long-standing target of 2%, and recent data has indicated a cooling in the labor market and manufacturing output. Though the broader economy remains on stable footing, signs of softening growth have prompted the Fed to act preemptively to avoid a sharper slowdown.
Fed Chair Jerome Powell and other policymakers have acknowledged the need for flexibility, emphasizing a data-driven approach in recent public comments. The central bank’s objective, Powell reiterated, is to strike a balance between supporting growth and ensuring inflation remains contained.
Markets Welcome the Shift, But Risks Remain
Financial markets have responded favorably to the prospect of lower borrowing costs. Bond yields have fallen in anticipation of easing, and equities have broadly rallied since the August rate cut. For consumers and businesses, lower interest rates generally mean more favorable conditions for loans, mortgages, and credit, potentially stimulating investment and spending.
However, the policy shift is not without drawbacks. Savers are likely to see lower returns on deposit accounts and fixed-income investments, such as Treasury securities. Additionally, some economists warn that aggressive rate cutting could eventually rekindle inflationary pressures, particularly if consumer demand rebounds too quickly.
The Fed faces a delicate balancing act. While rate reductions can provide short-term stimulus, they also limit the central bank’s future options should the economy take an unexpected turn. Officials have stressed that the August cut was not necessarily a template for future decisions and that each move will depend on evolving economic conditions.
Outlook for 2025 and Beyond
The outlook beyond 2024 suggests further easing. Market indicators suggest investors expect at least another 100 basis points of cuts in 2025, especially if growth continues to decelerate or if global economic uncertainties—such as geopolitical instability or trade disruptions—intensify.
Still, the path forward remains uncertain. The Federal Reserve is closely monitoring inflation metrics, employment data, and consumer sentiment. If inflation remains low and growth slows further, the central bank may have little choice but to continue its easing cycle into next year.
In the meantime, all eyes will be on the September 18 meeting, where the Fed is expected to confirm its next move. That decision will set the tone for monetary policy through the end of the year and offer insight into how officials plan to navigate the complex economic terrain ahead.
