Fed faces high-stakes interest rate decision amid Trump pressure

The Federal Reserve is set to announce its September policy decision on Wednesday afternoon, with Wall Street expecting the first interest rate cut of 2025 . Both investors and policymakers are focused on the size of the move, widely predicted to be a modest cut of 25 bps. But they’re even more focused on the future: how far and how fast the Fed might go from here.

Whatever happens, the stakes are high. President Donald Trump has relentlessly, openly pressured the central bank to slash rates by far more than Fed officials think is warranted, while simultaneously moving to reshape the board. His top economic adviser, Stephen Miran, was sworn in as a Fed governor just as the meeting began. And Trump continues to fight in court to remove Fed Governor Lisa Cook , a case now likely headed to the Supreme Court.

Meanwhile, Fed Chair Jerome Powell is trying to hold the line. At 2:30 p.m. E.T., he will face reporters in what may be the most politically charged news conference of his carer, attempting to explain how the central bank is balancing its twin mandates of stable prices and full employment amid ongoing political interference.

Add in relatively stagflationary conditions as measured by jobs numbers and CPI prints , and the pressure on Powell only mounts.

The Fed has kept rates steady since December, holding tight even as trade policy roiled markets and jobs data began to weaken. August payrolls showed just 22,000 jobs added, with unemployment creeping up to 4.3%. A benchmark revision earlier this month erased nearly a million jobs from prior counts, fueling Wall Street talk of a “ jobless expansion .”

Inflation remains stuck around 3% , above the Fed’s 2% target, in part because of Trump’s tariffs and ongoing trade wars. Powell, after months of caution, said in August that indications point to tariffs’ inflationary impact as temporary. But many economists warn that the pass-through effects — rippling out to U.S. households already feeling price pressur e—could intensify through September, October, and beyond.

The Fed’s independence is under scrutiny — some say in outright jeopardy — as Trump attacks Powell as “too late” and agitates for faster, steeper cuts. Dramatic stock market moves have followed some of Trump’s more serious attempts to take more control, but the outlook remains murky, with Politico’s Victoria Guida noting that if courts give Trump more authority to remove governors, the balance of power inside the Fed could shift decisively from here.