Fed, under pressure to cut rates, tries to balance labor market and inflation – while avoiding dreaded stagflation

Interest rates are a tricky balancing act, as Fed Chair Jerome Powell knows well. AP Photo/Alex Brandon

The Federal Reserve is in a nearly impossible spot right now.

Markets are expecting a quarter-point interest rate cut to a range of 4% to 4.25% when the Fed policy-setting committee concludes its latest meeting on Sept. 17, 2025. After all, the slowdown in the jobs market, as well as a massive revision to past figures showing close to a million fewer jobs were created than previously reported, makes a strong case for lower interest rates to shore up the economy.