FOMC Under Trump’s Pressure: What Are the Key Points?

0.25 Percentage Point Cut Seen as Certain
Number of Rate Cuts Expected to Increase from Two to Three

Amid continued pressure from President Donald Trump, the main focus of the September Federal Open Market Committee (FOMC) meeting is how quickly and how many times the U.S. Federal Reserve (Fed) will further cut interest rates. The market has already taken a 0.25 percentage point cut as a given, and the biggest question is whether the number of rate cuts this year will increase from the previously expected two to three. There is also keen attention on whether the Fed can maintain its independence despite political pressure, such as President Trump’s attempt to dismiss Fed Governor Lisa Cook and the nomination of Stephen Myron as a new governor.

Yonhap News Agency

According to foreign media outlets such as the Wall Street Journal (WSJ) and CNBC on September 16 (local time), the majority of market participants have already factored in the likelihood that the Fed will cut its benchmark interest rate by 0.25 percentage points at this meeting. This expectation is due to the recent sharp slowdown in job growth. Fed Chair Jerome Powell has signaled since last month that he is placing more weight on the slowdown in employment than on inflation, effectively foreshadowing this decision. According to the CME FedWatch Tool, the interest rate futures market reflects a 96% probability that the Fed will cut the current benchmark rate of 4.25-4.5% by 0.25 percentage points, and is leaning toward the possibility of up to three rate cuts this year.

With a rate cut at this meeting now considered a certainty, investors are turning their attention to the Summary of Economic Projections (SEP), which is released quarterly. This includes the Fed’s “dot plot” showing policymakers’ future rate expectations, and the key issue is whether the number of rate cuts this year will be raised from two to three. At the June FOMC meeting, the Fed’s dot plot indicated a total of two rate cuts for this year.

The WSJ analyzed, “If Chair Powell places even greater emphasis on the slowdown in employment following the weak August jobs report, market expectations for consecutive rate cuts could gain traction. However, this would have to overcome both uncertainty about the neutral rate and resistance from other Fed officials.” There is also interest in what message Powell will deliver after this rate cut. Last month, he argued that the inflation caused by tariffs could be temporary and emphasized concerns about employment over inflation. The WSJ pointed out that this “reminds us of the Fed’s mistake in underestimating inflation in early 2021.”

With President Trump shaking the Fed through intervention in personnel matters and public statements, whether the Fed can make monetary policy decisions independently is another key focus of this FOMC meeting. The WSJ described this meeting as “the most unusual Fed meeting,” explaining that this is due to President Trump’s ongoing criticism of the Fed and the legal battle over the dismissal of Governor Cook.

In fact, even just before the meeting, President Trump posted on Truth Social, saying, “Jerome Powell is late again,” and argued, “The Fed needs to cut rates by more than expected, and only then will the housing market recover.”