25-basis-point cut in September may alleviate some of Trump’s pressure on Fed, while all eyes turn to policy decisions of major banks, including European Central Bank, Bank of England
The US Federal Reserve is expected to issue a rate cut this September after maintaining its rates for nine months, while other central banks may keep their cautious stance.
The Fed’s monetary policy decision this month will guide the central banks of the world, as all eyes turn to the bank’s policy roadmap amid tariff uncertainties.
As inflation risks rise in parallel with US President Donald Trump’s protectionist trade policies, the Fed last noted that inflation was somewhat high in its most recent Federal Open Market Committee meeting.
Fed Governors Michelle Bowman and Christopher Waller were in favor of a 25-basis-point cut at the last meeting.
Fed Chair Jerome Powell signaled a rate cut during his speech at the annual conference, the Jackson Hole Economic Policy Symposium, in the US state of Wyoming on Aug. 22.
Analysts say that some bank officials expect the Fed to cut rates by 25 basis points in its September meeting, which could alleviate some of Trump’s pressure on the bank.
The Fed’s likelihood to cut rates this month stands at 87% in money market estimates, bringing the policy rate to a range of 4.25-4% on Sept. 17.
The Fed will also release its Beige Book on Wednesday to shed some light on the bank’s assessment of the current situation, as investors focus on the state of the US economy.
The Fed is not the only bank under investors’ radar this month.
The Bank of Japan (BoJ) maintained its policy rate at 0.5% in July, and it is expected to continue the trend into September, while raising rates by some 25 basis points by the end of the year.
The BoJ raised its inflation forecast from 2.2% to 2.7% for fiscal 2025, from 1.7% to 1.8% for fiscal 2026, and from 1.9% to 2% for fiscal 2029.
US Treasury Secretary Scott Bessent criticized the bank for entering its monetary tightening cycle later than most banks, saying it lagged behind in fighting inflation.
The BoJ is expected to raise its policy rate by 25 basis points in December.
Meanwhile, Europe’s slow manufacturing activity and economic growth risks continue to pressure the region.
In the face of US tariffs, European banks are trying to act with caution, but the monetary easing in the region is expected to come to the fore as tariff-induced uncertainties wane.
The European Central Bank (ECB) maintained its three key policy rates in its last meeting in July, while the Bank of England (BoE) lowered its policy rate by 25 basis points to 4%, within estimates.
The ECB and the BoE are expected to maintain their monetary policies unchanged on Sept. 11 and Sept. 18, respectively.
The Swiss National Bank is expected to keep its policy rate unchanged in neutral territory in late September.
Across the globe, the Reserve Bank of Australia (RBA) is expected to skip September.
The RBA cut its policy rate by 25 basis points to 3.6% last month due to core inflation continuing to decline towards the middle of the year. The latest cut brought the total to 75 basis points since the beginning of the year.
However, inflation in Australia rose 2.8% in July, above estimates, led by rising electricity prices. The RBA may still cut rates by 25 basis points on Sept. 30.
Meanwhile, Türkiye’s Central Bank (TCMB) cut rates by 300 basis points to 43% in July, and the bank’s Monetary Policy Board will gather on Sept. 11 for a policy decision.
TCMB Governor Fatih Karahan said last month that the bank expects the inflation to fall to 25–29% at the end of 2025, and to 13-19% at the end of 2026.
The bank had announced that there would be no renewals or opening transactions in FX-protected deposit accounts for real persons, starting Aug. 23.
Investors eye the monetary policy decisions of the Central Bank of Russia, Sweden’s Riksbank, the Hungarian National Bank, Poland’s NBP, and the Czech National Bank to be announced this month.
