WASHINGTON — Federal Reserve officials gather Tuesday and Wednesday to decide whether to begin trimming interest rates, but the meeting is shrouded in uncertainty about who will participate and how deeply policymakers will act.
Investors widely expect the central bank to cut its benchmark rate by a quarter point, to about 4.1%, but officials must weigh a labor market that has slowed sharply against inflation that remains above the Fed’s 2% target. The Fed will also release its quarterly economic projections on Wednesday, which economists say are likely to signal one or two additional cuts this year and more reductions next year.
Attendance at the meeting could itself be decided at the last minute. President Donald Trump has pursued a legal effort to remove Fed Governor Lisa Cook, and an appeals court or the Supreme Court could rule on that challenge before officials convene. The meeting will likely include Stephen Miran, a White House economic aide whom Trump has nominated to the Fed’s board, but Miran’s confirmation may not be resolved until late Monday.
Those personnel questions matter because the Federal Open Market Committee typically has 12 voting members — the seven governors and five regional bank presidents on a rotating basis. If Cook is removed or Miran is not in place, 11 officials would vote. Either configuration would probably produce enough votes for a quarter-point cut, but officials acknowledge an unusual potential for division.
Some officials are expected to favor a smaller reduction, while others may press for a larger half-point cut. If Miran and Governor Michelle Bowman back a steeper cut and regional presidents oppose cuts entirely, the meeting could result in dissents on both sides, a split the Fed has not registered since 2019. "This is a situation central banks really don’t like: the combination of inflationary pressure and labor market weakness," said David Andolfatto, an economics professor at the University of Miami and former top economist at the Federal Reserve Bank of St. Louis.
Economic data present the difficult trade-offs facing policymakers. Hiring has weakened in recent months: employers shed 13,000 jobs in June and added just 22,000 in August, the government reported. A preliminary Labor Department revision also showed fewer jobs added in the year ending in March than previously estimated. At the same time, inflation has persisted above the Fed’s goal; core consumer prices — which exclude volatile food and energy costs — rose 3.1% year over year in August.
The Fed’s dual mandate from Congress directs it to pursue both stable prices and maximum employment, and officials have signaled differing emphases. Chair Jerome Powell and several policymakers have highlighted slowing hiring as a reason to ease policy, a factor that helped shape expectations for a quarter-point reduction. Still, the persistence of inflation argues for caution and could lead the Fed to proceed slowly with further cuts.
The meeting takes place under unusually pointed political pressure from the White House. President Trump has publicly demanded lower rates, sought to remove a sitting governor and has used disparaging language about Powell. Economists and former Fed officials said the level of public criticism is unprecedented in its personal tone, though past presidents have applied pressure in other ways.
Loretta Mester, former president of the Federal Reserve Bank of Cleveland, said Fed officials aim to base decisions on economics rather than criticism but acknowledged the attacks could erode public confidence. "Added to their list of the difficulty of making policy because of how the economy is performing, they also have to contend with the fact that there may be some of the public that’s skeptical about how they’ve gone about making their decisions," she said.
Ellen Meade, an economics professor at Duke University and former senior economist at the Fed, noted the contrast with prior clear turning points: during the early pandemic the central bank rapidly eased policy, and it acted swiftly in 2021–22 when inflation surged. "It’s a tough time," she said. "Some people would want to cut, some people would not want to cut."
Policymakers will publish their economic projections and an updated policy statement on Wednesday, providing guidance on rate trajectories and the Fed’s assessment of risks. Those projections and the accompanying statement will be closely parsed by investors and markets for signals about how quickly the Fed intends to move and how the institution is navigating the simultaneous challenges of slowing employment growth and persistent inflation.
For now, the central bank faces a rare mix of domestic economic ambiguity and explicit political scrutiny as it seeks to balance its twin mandates while preserving its independence and credibility.