Trump Pushes for a Big Cut, but Markets Expect Only a Small One

Trump: “Good Time for Rate Cuts, Expect a Big Cut”
Experts and Markets Align on a Small September Cut
Key Monetary Policy Decisions Loom This Week in Japan, UK, and Beyond

U.S. President Donald Trump has called on the Federal Reserve to deliver a “big cut” of 0.5 percentage points to its benchmark interest rate. Arguing that inflation is showing signs of easing, he said a sharp rate reduction is needed to stabilize the housing market. Markets, however, increasingly expect the Fed to opt for a more modest cut of 0.25 percentage points this month.

Trump Renews Pressure for Rate Cuts

According to a Bloomberg report on the 14th, President Donald Trump told reporters, “I think there will be a big cut. Now is the perfect time to lower rates.” He has repeatedly urged the Federal Reserve to slash the benchmark interest rate—currently at 4.25–4.50%—down to around 1%, and has even hinted at firing Fed Chair Jerome Powell for refusing to deliver aggressive cuts.

Trump argued, “Now is the perfect time for a cut. By keeping rates where they are, Powell is doing the most damage to the housing market.” He added that the broader economy was in good shape apart from housing, noting, “Prices for almost everything—energy, food—have come down. But because the Fed isn’t doing its job, housing prices haven’t.”

Recent U.S. inflation data aligns with Trump’s claims of easing price pressures. The Consumer Price Index (CPI) rose 2.9% year-on-year in August, matching forecasts by Reuters and The Wall Street Journal. The Producer Price Index (PPI), a leading indicator for CPI, fell 0.1% from the previous month, far below the 0.3% increase expected in a Dow Jones survey.

Market Outlook: A Small Cut, Not a Big One

Analysts see little chance of the Fed delivering a “big cut” this month. While a rate reduction is widely expected, most believe it will be limited to 0.25 percentage points. A Reuters poll conducted from September 8–11 found that 105 out of 107 economists expect the Fed to lower the benchmark rate by 25 basis points at its September 16–17 FOMC meeting.

Markets reflect the same view. According to the CME FedWatch Tool, futures trading implies a 96.4% probability that the federal funds rate will be trimmed to 4.00–4.25% this month, while the odds of a larger 0.5-point “big cut” are under 4%.

U.S. Treasury yields have also moved lower on rate-cut expectations. The benchmark 10-year yield fell to 3.994% on September 11—the lowest since April’s “tariff shock”—before settling around 4.07%. The 2-year yield remains in the mid-3.5% range with minor fluctuations, while the 30-year yield dropped over 2 basis points to 4.65% on the 11th and is now holding near 4.68%. Bond prices and yields move inversely, meaning falling yields indicate stronger demand for Treasuries.

Global ‘Rate-Cut Relay’ Ahead

If the Federal Reserve follows through with a rate cut as markets expect, central banks worldwide will face increasingly complex policy choices. By the end of this week, countries representing two-fifths of global GDP—including four of the G7—will decide on monetary policy. Between September 17–19, the U.S., Canada, the U.K., and Japan will announce rate decisions, alongside Taiwan, South Africa, Brazil, and Indonesia.

In Japan, the Bank of Japan is widely expected to hold rates steady. According to Nikkei and other local outlets, officials argue it is more important to first assess how U.S. tariff policies are impacting economic and inflation conditions at home and abroad. Markets also anticipate no change at this week’s meeting, with the next possible hike not expected until the BOJ’s October policy review. The U.K., Indonesia, Brazil, and South Africa are likewise forecast to keep rates unchanged.

By contrast, Canada and Norway may move in line with the Fed and cut rates. Canada is likely to lower its policy rate from 2.75% to 2.50% to counter rising inflation, weakening labor conditions, and slowing growth. In Norway, hotter-than-expected and persistent inflation has strengthened the case for a cut as well.