Is the Fed ready to start cutting interest rates?

Recession fears and a presidential election affect the calculation

Illustration of Federal reserve building, Jerome Powell and dollar graphics
Without a rate cut, one financial analyst told clients that a recession is "increasingly inevitable by year-end"
(Image credit: Illustration by Stephen Kelly / Getty Images)

The recent slide in financial markets could lead to "aggressive rate cuts" by the Federal Reserve, said CBS News. Fed officials have raised rates over the last two years to rein in inflation, and Chair Jerome Powell had signaled he wanted to see "more evidence that inflation was cooling before cutting rates." But a weaker-than-expected August jobs report — and fears that the economy could be headed into a recession — has sparked "fears the Fed has been tardy in lowering rates."

"Powell faces a mutiny" if he doesn't act to cut interest rates at the Fed's next meeting in September, Eleanor Pringle said at Fortune. Without a rate cut, CNBC reported, one financial analyst told clients that a recession is "increasingly inevitable by year-end." But an emergency cut in the meantime is unlikely: The Fed has taken such drastic action only a few times in its history — and only in the most dire of economic moments. "If the question is, 'Should the Fed consider an intermeeting cut now?' we think history says, 'No, not even close,'" said a Bank of America analyst.

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Joel Mathis, The Week US

Joel Mathis is a writer with 30 years of newspaper and online journalism experience. His work also regularly appears in National Geographic and The Kansas City Star. His awards include best online commentary at the Online News Association and (twice) at the City and Regional Magazine Association.