U.S. Federal Reserve & Interest Rates as of mid-September 2025

 

 U.S. Federal Reserve & Interest Rates as of mid-September 2025: 

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🏛 Key Developments

1. Expected Rate Cut Soon

   • The Fed is expected to reduce its benchmark federal funds rate by 25 basis points at its meeting on September 17, 2025, bringing the target range to 4.00%–4.25%. Reuters+4CBS News+4Fox Business+4

   • Markets show very high probability (~96%) of this 25-point cut. A larger cut (50 bps) is considered less likely. Reuters+3Fox Business+3Investopedia+3

2. Political Pressure & Fed Independence Concerns

   • Former President Trump has publicly urged a "bigger" cut than what is expected, citing economic challenges and housing market pressures. Reuters+1

   • At the same time, legal / political disputes (e.g. attempts to remove Fed Governor Lisa Cook, and the appointment of Stephen Miran) are occurring just ahead of the meeting. These raise concerns about the Fed’s institutional independence. ABC News+4AP News+4Reuters+4

3. Labor Market Weakening

   • Recent job growth has slowed; some data suggest hiring is much softer than earlier in 2025. Reuters+3Fox Business+3Investopedia+3

   • The labor market weakening is helping build the case for a cut. The Fed needs to balance this against inflation concerns. CBS News+1

4. Inflation & Price Pressures Still Elevated

   • Inflation has not fully returned to the Fed’s 2% target. Some recent data show inflation creeping up again in certain measures. Fox Business+2Schwab Brokerage+2

   • Tariff-related costs and import prices are contributing to inflation pressures. Investopedia+1

5. Forward Guidance and Projections (the “Dot Plot”)

   • The Fed is expected to update its Summary of Economic Projections, including where officials believe the “terminal rate” (or longer-run neutral rate) will settle. Axios+2Investopedia+2

   • There is uncertainty around how many cuts Fed officials will project for the rest of 2025 (October, December) and into 2026. Some expect 2-3 cuts; others are more cautious. Axios+2Reuters+2

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🔍 What This Means / Implications

• For Borrowers & Consumers
  A rate cut should slowly reduce borrowing costs (for things like adjustable rate loans/mortgages, credit cards). But since inflation remains sticky, real borrowing costs may still be higher than many would hope.

• For Investors / Bond Markets
  Many investors are positioning for rate cuts. Bond markets are reacting: longer-term Treasuries have been in focus as people anticipate easing. Reuters

• For the Fed’s Credibility & Independence
  Political pressure (e.g. from the President) makes the Fed’s decision more costly in terms of perception. Decisions going forward will likely be closely scrutinized for signs the Fed is yielding to external pressure vs. following data. Governors’ votes / dissents could become more visible.

• Balancing Act
  The Fed is in a tricky spot: if it cuts too much, too quickly, it risks inflation running hot again. If it holds off too long, the weakening job market might deepen. The new projections will provide clues about which risk they weight more heavily.