The Fed decision and other reports: recipe for a wild week

The Federal Reserve, in all probability, will cut its key interest rate on Wednesday. The decision leaves two questions:

• How big will the rate cut be?
• How many more cuts are ahead?

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Short answers: Probably a quarter percentage point and more cuts in October and December. 

But there’s more coming. 

The Fed meeting is, by far, the week’s biggest economic event, and it comes amid a hugely important battle over who gets to make monetary policy: the Fed or President Donald Trump. 

Related: Gold sizzles — really sizzles — before Fed decision

Other important reports are coming this week as well, including retail sales on Tuesday and housing starts and building permits on Wednesday before the Fed decision is announced.

Technically, the Fed will decide where to set the Federal Funds Rate, which drives short-term interest rates in the U.S. 

The rate has been in a range of 4.25% to 4.5% since December 2024, much to the annoyance of Trump, who wants lower rates and is now busily trying to bring the Fed under his control. 

He has sent over Stephen Miran, the chairman of his Council of Economic Advisors, to fill a vacancy on the Fed until January. Miran, expected to win Senate confirmation Monday, has said he would hold onto his White House job on an unpaid basis. 

That decision drew fire from Sen. Elizabeth Warren (D-Massachusetts), ranking member of the Senate Banking, Housing and Urban Affairs Committee.

Placing Miran on the Fed board “is part of Donald Trump’s campaign to take over the Federal Reserve – one he launched months ago to distract from his failure to lower costs ‘on day one,'” the senator said in a Sept. 9 statement.

“A Fed that serves the political whims of the President instead of making independent decisions based on what is good for our economy will hurt American families and our economy.”

Trump has been trying to fire another Fed governor, Lisa Cook, accusing her of mortgage fraud. That battle is now in the the courts.

And Scott Bessent, the treasury secretary, is already interviewing candidates to succeed Jerome Powell, whose term as chairman expires in May 2026. 

Related: Forget rate cuts: Veteran analyst rings alarm on S&P 500

The economy begs for attention

All this comes as two big issues have emerged. 

• The economy is showing signs of slowing. Businesses are trimming investment plans, the economist Mickey Levy wrote in The Wall Street Journal. And Levy added that the Trump administration’s “immigration clampdown has constrained the labor supply.”
• The U.S. dollar has fallen more than 10% since Trump’s term began on Jan. 20. 

Job growth has slowed this year. Consumer spending has been lukewarm at best, and surveys of consumer confidence show many Americans are stressed out about the economy. 

The dollar decline may be by design. A lower dollar makes U.S. exports cheaper and imports more expensive. That’s great for, say General Motors  (GM)  or Boeing  (BA) .

But a lower dollar adds inflationary pressures to the economy, and potentially higher market-driven interest rates, to go with the impacts of the president’s tariff plans.

Mark Zandi, chief economist at Moody’s, says a recession may have started, but it will be some time before his opinion is confirmed.

And that’s just the Fed piece of the puzzle. 

Related: Anthropic’s $1.5 Billion AI Settlement Hits a Roadblock in Court

Adding to the week’s complications

Along with the Fed decision are three more important reports: 

• Retail sales for August, due Tuesday. The Wall Street consensus is for a 0.3% gain from July, which was 0.5%.
• Housing starts and building permits in August, due Wednesday just before the Fed decision. Both are expected to show small declines. Zandi calls building permits “the most critical economic variable for predicting U.S. recessions.” And he said in a Sunday tweet that they’re running at the lowest level since the pandemic shutdowns.  
• The weekly initial jobless claims report, due Thursday morning from the Labor Department. Last week’s report showed 263,000 people filed for unemployment insurance, the biggest number since 2021. 

More Economic Analysis:

• Volatility set for rise as Fed prepares to cut Interest Rates
• Fed official sends bold 5-word message on September rate cuts
• New inflation report may have major impact on your wallet
• Surprising GDP report resets backdrop for stocks

One more report to watch: the Conference Board’s Index of Leading Economic Indicators for August, also due Thursday. The Conference Board’s report for July showed the suite of indicators used to build the index dipped slightly. 

Think that’s enough to think about? So do I, and investors and traders are a bit wary of all that’s going on. 

Stock futures were modestly slightly Sunday evening. So traders look to be wary, too. 

To invoke the ghost of Bette Davis in “All About Eve,” buckle your seatbelts. The week may be a bumpy ride for investors.

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