By: Jemy Finance Market Research Team At Jemy Trade
16/9/2025
Global markets are fixated on Washington D.C. as the Federal Reserve prepares to make a decision on interest rates. This meeting is not merely a routine economic event; it’s a pivotal moment that could determine the trajectory of the world’s largest economy, amidst mounting inflationary pressures, conflicting market expectations, and an ongoing political struggle that casts a shadow over the central bank’s independence.
The Calm Before the Storm: Market Expectations
Heading into the announcement, market indicators suggest an almost certain rate cut. Current expectations point to the Fed reducing rates by 25 basis points, which would mark the first such move in a considerable period. This anticipation is fueled by recent economic data showing a slowdown in job growth, reinforcing the notion that the U.S. economy may need a stimulating push.
However, a key risk lies in the “dot plot” to be released by members of the Federal Open Market Committee (FOMC), which reveals their future interest rate projections. While some anticipate one or two cuts this year, others believe inflation remains a significant threat. This could push the Fed to adopt a more cautious, “hawkish” tone than the markets hope for, potentially surprising investors and leading to sharp volatility.
The Stubborn Inflationary Wall: Jerome Powell’s Challenge
Despite the rate cut expectations, inflation remains a major hurdle. The latest data showed an uptick in the annual inflation rate, reaching 2.9% in August—above the official 2% target. This rise is primarily attributed to higher service costs, particularly housing. This situation places Fed Chair Jerome Powell in a true dilemma, as he must strike a delicate balance between supporting economic growth and controlling prices—a challenge often referred to as engineering a “soft landing.”
The White House vs. The Fed: Trump vs. Powell
The complexity of the situation is further compounded by the unprecedented political pressure from President Donald Trump. Since taking office, Trump has consistently and publicly criticized Jerome Powell, demanding a “significant” interest rate cut to boost the economy. He has even gone so far as to hint at his potential removal. Trump argues that Powell’s “tightening” policies have hindered U.S. economic progress and negatively impacted vital sectors like the housing market.
For his part, Powell has steadfastly defended the Fed’s independence, stressing that its decisions are based solely on economic data, not political pressure. This conflict not only highlights the tense relationship between the U.S. President and his central bank head but also raises questions about the future independence of the world’s most important monetary institution. This makes tomorrow’s decision more than just a number; it’s an economic and political statement with far-reaching implications.
What Happens Next?
All eyes will be on Jerome Powell’s press conference following the decision. While the rate cut itself may align with market expectations, the tone Powell uses will determine the direction of stocks, the dollar, and gold. Will he signal further easing? Or will he remain cautious to avoid an inflationary resurgence? The answers to these questions will be the main headline for the markets in the coming days.
