The U.S. Federal Reserve is widely expected to deliver a quarter-point interest rate cut at its two-day meeting ending Wednesday, a decision that will begin shaping expectations for President Donald Trump’s upcoming nominee to lead the central bank. While Trump has called for deeper cuts to lower borrowing costs—particularly to bolster the housing market ahead of the midterm elections—policymakers remain cautious amid forecasts of resilient growth, strong consumer spending driven by enhanced tax refunds, and stubborn inflation near 3%.
The central bank’s updated projections for rates, inflation and unemployment will be closely watched, especially as divisions within the Fed widen over how far and fast to ease policy. September projections signaled only one rate cut in 2026, and this week’s outlook is clouded further by a 43-day government shutdown that left key economic data gaps. Economists surveyed by Reuters expect 2026 growth of about 2%, inflation around 2.8%, and unemployment near 4.4%—figures that offer little comfort to officials insisting that inflation’s downward trend must be certain before easing aggressively.
As Jerome Powell’s term ends in May, Trump’s push for a more dovish Fed—alongside speculation that advisers such as Kevin Hassett could assume the chair—adds new political pressure to the rate path. Analysts warn that cutting rates too sharply could backfire, driving up long-term borrowing costs if markets view the move as inflationary. With persistent price pressures and a still-firm labor market, the next Fed chair may face the same dilemma that has defined Powell’s tenure: navigating the demands of the White House while safeguarding the central bank’s inflation goal.
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