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It's finally happening. Following months of economic debate and growing criticism from President Donald Trump, the US central bank is poised to cut borrowing costs this week.

The Fed is widely expected to declare it is lowering the benchmark for its key lending rate by a quarter of a percent. This would place it in a range of 4% to 4.25%—the smallest figure in over a year and a half.

The move—the bank's first rate cut since last December—is expected to kick off a series of additional cuts in the months ahead, which should help bring down loan expenses across the US.

A Warning Regarding the Economy

However, the move includes a caution about the economy, indicating increased agreement at the Fed that a slowing employment sector requires a boost in the shape of reduced interest rates.

Nor are they likely to satisfy the commander-in-chief, who has demanded much larger reductions.

Reasons Behind the Reduction Was Anticipated

In many ways, it is expected that the Fed, which sets monetary policy independent of the White House, is cutting.

The inflation that ripped through the post-pandemic economy and prompted the bank to raise borrowing costs in recent years has come down substantially.

In the UK, Europe, the northern neighbor and other regions, central banks have already acted with reduced rates, while the Fed's own officials have stated for an extended period that they anticipated to lower borrowing costs by at least 0.5% this year.

During the previous gathering, two members of the committee even supported a cut.

Their proposal was rejected, as other members continued to be concerned that Trump's economic policies, including tax cuts, tariffs and mass detentions of foreign laborers, might cause inflation to rise again.

And it's true, the US in the past few months has experienced consumer prices increase slightly. Consumer costs rose nearly 3% over the 12 months to August, the quickest rate since the start of the year, and still above the Fed's inflation goal.

Labour Market Weakness Eclipses Price Concerns

But in recent weeks, those concerns have been eclipsed by weakness in the labour market. The US recorded meagre employment growth in the summer months and an outright loss in June—the initial drop since 2020.

The key factor is the developments in the employment arena—the deterioration observed over the recent period.

The Fed knows that when the labour market turns, it turns very quickly, so they're wanting to ensure they're not stepping on the brakes the economic activity at the same time the employment landscape has already slowed.

Political Pressure and Central Bank Autonomy

Although Trump has dismissed concerns about a softening economy, the rate cut should not be unwelcome to him—for a long time, he has blasting the Fed's reluctance to cut rates, which he claims should be as low as 1%.

On social media, he has called Federal Reserve chairman Jerome Powell incompetent, charging him of restraining the economy by keeping borrowing costs elevated for an extended period.

Trump's pressure is not just rhetorical. He moved quickly to install the head of his Council of Economic Advisers on the Fed in time for this monthly session after a short-term vacancy occurred recently.

His administration has also warned Powell with dismissal and probe and is locked in a court dispute over its attempt to remove another member of the committee.

Critics Warn Over Fed Independence

To critics, Trump's actions amount to an assault on the Fed's autonomy that is unprecedented in modern times.

Regardless of awkwardness in the air at this week's Fed meeting, experts say they think the Fed's choice to reduce rates would have occurred regardless of his campaign.

The president's policies are definitely causing the economic activity that is pressuring the Fed.

Public criticism of the Fed to reduce borrowing costs in my view has had no effect whatsoever.