Preparing for the Federal Reserve's extraordinary unusual assembly
The Federal Reserve is poised to make history this week, announcing its first interest rate cut since December 2015 at 2 p.m. ET on Wednesday. The move comes as the Trump administration continues to exert pressure on the historically independent Fed, with the administration's economic policies, particularly the tariffs, causing a ripple effect on the economy.
The slowing labor market is a major concern, with job growth during the summer being anemic. Employers added an average of about 29,000 jobs in the three months ending in August, a stark contrast to the robust job growth seen in previous years. This sluggish job growth has raised concerns about the health of the economy.
Inflation, another key economic indicator, has also been a topic of discussion. The Consumer Price Index rose 2.9% in August from a year earlier, as reported by the Labor Department last week. However, Fed officials, including Alberto Musalem, St. Louis Fed President, expect the effects of tariffs to work through the economy over the next two to three quarters, with the impact on inflation fading after that.
Mary Daly, San Francisco Fed President, has stated that tariff-related price increases will be a one-off, suggesting that the inflation spike may be temporary. This sentiment is shared by many, with most forecasts predicting 12-month inflation to continue to slowly increase for a couple more months, with monthly tariff effects dissipating by early 2026.
The Fed's Board of Governors has seen some changes recently. Stephen Miran, Trump's top economic adviser, was confirmed by the Senate to serve on the board, a swift process that took only about a month from when he was nominated to when he got sworn in. He will cast his first vote at this week's policy meeting.
However, the confirmation of Miran came amidst controversy. The Trump administration is trying to oust Lisa Cook, citing allegations of mortgage fraud, which the Justice Department is actively investigating. An appeals court on Monday rejected Trump's attempt to fire Cook while her lawsuit challenging Trump's removal order moves forward. Cook will also cast a vote at this week's meeting.
The current Federal Reserve Board of Governors includes Christopher Waller, Michelle Bowman, Lisa Cook (though Trump attempted to remove her), Stephen Miran (pending Senate confirmation as replacement for Adriana Kugler who recently resigned), and Jerome Powell whose term ends in May 2026; in total, there are seven governors appointed by the President and confirmed by the Senate, but not all members are named in the search results.
Despite the challenges, the Fed remains committed to supporting the economy. The interest rate cut is intended to support America's slowing labor market, providing a boost to businesses and consumers alike. The question remains, however, whether this move will be enough to counteract the ongoing economic uncertainties.
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