The Federal Reserve is widely expected to deliver its first interest rate cut of 2025 this week, a move that could set the tone for the rest of the year. But for traders and investors, the key question is not whether the Fed will cut—it’s how many more cuts could follow as the central bank faces a fragile job market, stubborn inflation, and mounting political pressure from the White House.
What the “Dot Plot” Could Reveal
One of the most closely watched signals will come from the Fed’s quarterly “dot plot”—a chart showing where policymakers expect interest rates to head over the coming months.
- In June, the dot plot showed officials leaning toward two cuts this year, reflecting uncertainty over the economic impact of tariffs, tax changes, and immigration policies introduced by the Trump administration.
- Markets are pricing in that the first cut will come this Wednesday, most likely a 25-basis-point reduction, the first easing move since December.
Will More Cuts Follow?
The Fed still has two additional meetings scheduled this year—in late October and December.
- If economic data continues to show labor market weakness, the Fed may be forced to accelerate its easing cycle.
- On the other hand, if inflation proves sticky, policymakers could take a more cautious stance, sticking with just one more cut.
White House Pressure Intensifies
The Fed’s decision to hold rates between 4.25%–4.5% for most of 2025 has frustrated President Trump, who has been openly pressuring the central bank to act faster.
- Trump recently installed Stephen Miran, a White House economic adviser, as a Fed governor just days before the meeting.
- His attempt to oust Governor Lisa Cook was blocked by a federal court earlier this week.
- The president has also turned up the heat on Fed Chair Jerome Powell, criticizing him as “Too Late” for not cutting sooner.
Market Impact to Watch
A rate cut this week is already priced in, but the market reaction will depend heavily on:
- The dot plot projections for 2025.
- Powell’s tone at the press conference—whether he signals a cautious one-off move or opens the door for multiple cuts in the months ahead.
For traders, this Fed meeting is not just about one rate cut—it’s about whether the dollar enters a prolonged period of weakness as US monetary policy pivots toward easing.
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