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s the Federal Reserve's September 16-17, 2025 meeting approaches, one question dominates the conversation: Will the Fed cut interest rates? Considering the mixed economic signals, I believe a 0.25% rate cut is likely, but the final decision will depend on key data points released before the meeting.

    The Fed has kept interest rates between 4.25%-4.50% since December 2024, with five consecutive meetings passing without any changes. However, a disappointing jobs report in July 2025 significantly increased the chances of a rate cut, from 37% to over 80%, according to the CME FedWatch tool.

    The economy is sending mixed signals, making the Fed's job challenging. Inflation remains above the target of 2%, with core inflation at 2.9%. The labor market seems to be cooling off, with a higher unemployment rate and slower job growth. May and June job numbers were revised downward by 258,000 jobs.

    At the July 30 meeting, two governors voted for a rate cut, showing pressure to lower rates. Fed Chair Jerome Powell played it cool, stating that no decision was made about September and emphasizing the need to balance cutting rates too soon or waiting too long.

    Tariffs are causing headaches, with Chair Powell admitting they've made some goods more expensive. The uncertainty around future tariff policy can hurt business confidence and investment decisions. Economic growth and consumer spending have slowed down, with domestic final sales growing by only 1.2% in the second quarter.

    Financial markets haven't been able to make up their minds, but after the weak jobs report, market participants now expect more aggressive rate cuts. Big Wall Street firms have changed their forecasts accordingly, with Goldman Sachs predicting three rate cuts in 2025 and BlackRock's Rick Rieder suggesting a possible 0.50% cut.

    The global view is that the Fed's decision will greatly influence global markets and other central banks. If the Fed starts slashing interest rates, the U.S. dollar may weaken, affecting emerging market economies and trade around the world.

    Uncertainty makes decisions tough, with the Economic Policy Uncertainty Index hitting a high of 243.7 in July 2025. Fed officials have said their forecasts are dispersed, and the job situation is crucial for the decision. Inflation has come down from its peak, but core inflation remains a concern.

    Based on all the evidence, I believe the Fed will likely cut rates in September, with markets estimating around an 80% chance of a 0.25% reduction. The challenge will be to figure out recent labor market problems are just a short-term glitch or a sign of something more serious.