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The Fed Has All The Data It Needs To Cut Interest Rates Next Week

Thu, Sep 11, 2025, 10:22 AM 2 min read

Andi Rice / Bloomberg via Getty Images Raphael Bostic and his fellow Fed voters are expected to put their focus on the labor market at their meeting next week.

The Federal Reserve is tasked with keeping inflation low and employment high.
Investors are certain the Fed will cut rates at its meeting next week after two reports Thursday.
Thursday's inflation report showed inflation ticked up in line with expectations. Experts say it's unlikely to be a large enough move to deter the Federal Reserve from lowering interest rates next week.
The number of jobless claims added to concerns about the weak labor market.

Inflation stayed hot in August, but not hot enough to discourage the Federal Reserve from cutting its key interest rate next week as widely expected.

Thursday's report on consumer prices showed inflation rising farther away from the Fed's goal of a 2% annual rate, but not fast enough to override the central bank's other main concern: the faltering job market. A separate report from the Department of Labor showed 263,000 people filed for unemployment last week, the most in nearly four years.

Those were the last major pieces of economic data the Fed will see before Wednesday. The central bank's policy committee is set to decide how to adjust its key fed funds rate, which influences borrowing costs on all kinds of loans.

"The Federal Reserve is in a difficult situation as the new data this morning show signs that its inflation and full employment mandates are both moving in the wrong direction," wrote Ryan Sweet, chief U.S. economist at Oxford Economics.

In the wake of the reports, financial markets were pricing in near certainty that the Fed would lower the influential interest rate by at least a quarter of a percentage point, according to the CME Group's FedWatch tool. The tool forecasts rate movements using fed funds futures trading data.

Fed officials have held interest rates steady since January, keeping borrowing costs high in an effort to wrestle inflation down to the central bank's goal of a 2% annual rate. Policymakers have worried that tariffs will push prices up, hindering their efforts.

However, a recent slowdown in the job market has forced the Fed to consider cutting rates to lower borrowing costs throughout the economy and encourage hiring. The unexpected jump in unemployment claims could reinforce those concerns.

Congress tasked the Fed with the dual mission of keeping inflation low and employment high. However, many economists have forecast that Trump's economic policies are steering the U.S. into a period of slow growth and elevated inflation, or "stagflation."

"With inflation above target and still rising, plus jobs momentum slipping, the Fed faces a difficult balancing act on both sides of its dual mandate," Jake Krimmel, senior economist at Realtor.com, wrote in a commentary.