Buzzy rumblings are escalating that the Federal Reserve is on the cusp of a dovish pivot to lower interest rates in your wallet and household budget.
JPMorgan has revised its outlook as to when the Federal Reserve will cut interest rates.
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JPMorgan cited mounting uncertainty around President Donald Trump’s temporary Fed appointee, plus growing signs of weakness in the labor market.
Economists and market watchers are concerned over what is perceived as the president's efforts to politicize the independent central bank’s monetary policymaking.
Related: Trump makes surprise decision on Federal Reserve
There’s also uncertainty around the impact of President Trump’s tariffs on inflation. In addition, many worry the Trump’s administration’s aggressive immigration campaign is decimating the low-wage and blue-collar work force, while the AI revolution wipes out entry-level roles for many new college graduates.
“This is an unusual administration to say the least,’’ Kevin O’Leary of “Shark Tank” told CNN.
Trump loyalist Stephen Miran tapped for Fed board
President Trump announced on Aug. 7 that he was nominating Council of Economic Advisers Chair Stephen Miran to temporarily fill a vacant Federal Reserve Board seat.
Miran, a Trump loyalist, has joined the president and Treasury Secretary Scott Bessent in heavily criticizing the Fed and Chair Jerome Powell over interest rates.
Miran, if confirmed by the Senate this fall, will serve in an interim appointment lasting until Jan. 31, 2026.
The Harvard-educated labor economist advocates stronger control over the Fed by the executive branch, shorter terms for the Board of Governors and nationalizing regional Federal Reserve banks.
Analysts warned that his proximity to the president’s aggressive stance on interest rates may increase a growing internal divide within the Federal Open Market Committee, the Fed’s policymaking panel that sets benchmark interest rates.
Related: A divided Federal Reserve mulls interest rate cut after wild week
Danske Bank’s chief strategist Frederik Romedahl told Bloomberg that Miran’s appointment “adds some uncertainty,” even if it’s not a total game-changer.
Market watchers like Andrew Brenner have deemed Miran controversial and questioned his business experience.
Others say the Miran appointment is unlikely to affect the expected pace of rate cuts in the short term because of the macroeconomic dynamics rippling through the economy.
How President Trump could win control of the Fed
Long term, the president could gain two appointees to the Fed board in 2025.
First, he needs a permanent replacement for Miran’s role (which very well could be Miran, depending on the president’s whims).
Second, Powell’s term as chair ends in May, and he has said he hasn’t decided if he plans to serve out the rest of his term into 2028.
Historically, Fed chairs leave the board when their chair terms expire. Theoretically, that would give President Trump four seats on the seven-member board.
Fed Governors Michelle Bowman and Christopher Waller are both Trump appointees from his first administration.
Waller is considered the current top candidate to replace Powell next year.
How the Federal Reserve uses interest rates
The Federal Reserve’s dual congressional mandate requires monetary policy that balances low unemployment and low inflation using interest rates as the benchmark tool.
Higher interest rates lower inflation but increase job losses.
Lower interest rates decrease unemployment but increase inflation.
More Federal Reserve:
- GOP plan to remove Fed Chair Powell escalates
- Trump deflects reports on firing Fed Chair Powell ‘soon’
- Former Federal Reserve official sends bold message on ‘regime change'
The president’s personal and professional attacks on Powell have escalated since the FOMC voted in July to hold the benchmark Federal Funds Rate steady at 4.25% to 4.50%.
The vote was noteworthy because Waller and Bowman both dissented, saying that emerging weakness in the labor market justified a .25 percentage-point rate cut.
That was the first dissenting FOMC vote since 1993.
The last rate cut was in December 2024.
President Trump wants a 3-point cut, saying it is necessary to curb recession fears, ease the stagnant housing market with lower mortgages, and reduce the interest on the federal deficit.
JPMorgan updates forecast on interest rate cuts
Economists and markets must consider not only data but also volatile political dynamics now swirling around the Fed.
JPMorgan had originally forecast one .25 percentage-point rate cut in December 2025.
It pulled that forward, forecasting a .25 cut at the Sept. 17 Fed meeting, Reuters reported.
JPMorgan added three additional .25 cuts before the Fed pauses. The note did not give a firm timeline for those cuts.
Analyst Michael Feroli wrote that “the risk-management considerations at the next meeting may go beyond balancing employment and inflation risks.”
Meanwhile, market odds for a September cut have surged, with the CME Group’s FedWatch tool forecasting the likelihood at 88.9%.
Related: Consumers fear inflation as tariffs hit home: Federal Reserve report
