White House Pushes as Fed Prepares First Rate Cut of 2025

The Federal Reserve is poised to deliver its first interest rate cut of 2025 at its September policy meeting, following a disappointing jobs report that highlighted a slowing labor market. The August jobs data revealed the addition of just 22,000 positions, significantly below the 75,000 forecast by economists, while the unemployment rate edged up to 4.3% from 4.2%. The downward revision of June’s job gains to a loss of 13,000 further underscored the trend of weakening employment growth [1].

Federal Reserve Chair Jerome Powell has indicated openness to adjusting policy, noting a shift in the balance of risks in a recent Jackson Hole speech. With the latest report reinforcing the need for action, market participants are now almost certain of a rate cut at the Sept. 16–17 meeting. The CME Group’s FedWatch tool reflects this confidence, with the probability of a cut standing at 99% [1]. Some analysts predict a 50-basis-point cut, with investors pricing in a 14% likelihood of such a larger-than-typical move [2].

The debate among analysts centers on the size and implications of the cut. While the consensus supports at least a 25-basis-point reduction, the key question lies in whether the move will be perceived as “dovish” or “hawkish” based on Powell’s communication and the central bank’s outlook for future meetings. UBS’s Leslie Falconio emphasized that the tone and forward guidance from the Fed will play a critical role in shaping market expectations [1]. Meanwhile, economist Greg Daco from EY suggested the cut is likely to be small but noted the more pressing issue is how the Fed will proceed after this month [1].

The White House has been vocal in its support for rate easing, with Labor Secretary Lori Chavez-DeRemer criticizing Powell for delaying action. She argued that reducing rates would help stimulate business investment and support the workforce, which she described as essential for economic growth. President Donald Trump also weighed in, calling Powell's delayed response as undermining the economy [1].

Market observers suggest that the Fed’s decision is influenced by its dual mandate—maintaining price stability while promoting maximum employment. While inflation remains above the 2% target, the labor market slowdown appears to have tipped the balance toward action. Analysts believe that the central bank may now prioritize preventing further unemployment rather than focusing solely on inflation, particularly in light of the muted inflationary impact from recent tariff measures [2].

The expected rate cut is anticipated to have a broad impact, particularly on mortgage rates, although the initial move is likely to be modest. A 25-basis-point reduction would bring the federal funds rate to a range of 4.00% to 4.25%, but mortgage rates may not see significant drops immediately, as lenders have already begun adjusting rates in anticipation of the Fed’s move [3]. The 10-year Treasury yield, which strongly influences mortgage rates, will continue to play a key role in shaping the direction of borrowing costs in the coming months [4].

Source: [1] Jobs slowdown seals Fed rate cut as White House criticizes Powell for not acting sooner (https://finance.yahoo.com/news/jobs-slowdown-seals-fed-rate-cut-as-white-house-criticizes-powell-for-not-acting-sooner-150805909.html) [2] Jobs Report Seals Federal Reserve Interest Rate Cut (https://www.investopedia.com/job-report-seals-federal-reserve-interest-rate-cut-in-september-11804268) [3] How low will mortgage rates fall with a September Fed rate cut? (https://www.cbsnews.com/news/how-low-will-mortgage-rates-fall-september-2025-fed-rate-cut/) [4] Mortgage Rates May Fall Before Fed's Much-Anticipated Move (https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202509042259BENZINGAFULLNGTH47514331)