Revised labour market data could tilt the scales for the Federal Reserve’s upcoming decision
WITH just a week left until the US Federal Reserve’s Sep 17 meeting, markets are pricing in a high probability of the first interest rate cut since late 2024. However, the decision remains far from certain, with compelling arguments on both sides of the debate.
The Fed has maintained the federal funds rate at 4.25 to 4.50 per cent for five consecutive meetings throughout 2025, following three rate cuts in late 2024. The central bank describes the current rate level as “modestly restrictive”, indicating it’s designed to have a slight dampening effect on economic activity to help bring inflation back to the Fed’s 2 per cent target.
The case for a rate cut
The strongest argument for a September rate cut stems from concerning labour market data. The July 2025 jobs report showed disappointing employment growth with downward revisions to previous months, pushing the unemployment rate to 4.2 per cent. This marked deterioration in hiring conditions has raised fears that the labour market may be approaching a more significant downturn.
