US FEDERAL RESERVE INTEREST RATE
The U.S. Federal Reserve is again in the spotlight. With inflation in retreat and the economy slowing, traders and investors expect at least two interest rate cuts before the end of the year. That alone would be enough to maintain volatility and keep markets guessing, but there’s another layer to the story: politics. The Fed was built to be independent, yet it now faces pressure from the White House that could call into question investor confidence.
- A BRIEF HISTORY OF FED RATE CUTS (2020 – 2025)
Looking back helps explain where we are today. In March 2020, when the pandemic hit, the Fed slashed rates to near zero for two years to keep the economy afloat. But when inflation hit a forty-year high, the Fed changed policy in March 2022 and moved to hike rates quickly. By July 2023, the benchmark rate was above 5%, levels not seen in two decades.
From late 2023 into mid-2024, inflation started easing, and talk of cuts returned. The first cut was in September 2024, followed by further quarter-point reductions over a series of months to the current rate of 4.5%. Now, the consensus is for two cuts before the year is out, with the first expected to take place on September 17th.
- FED INDEPENDENCE TESTED
Fast forward to today. Former President Donald Trump has stated he wants rates to come down. Earlier this year, he put pressure on Fed Chair Powell, with senior officials suggesting publicly that Powell could be removed, even though there is no solid legal basis for a President to order it. In July 2025, he even tried to remove Fed Governor Lisa Cook, and a criminal inquiry by the Justice Department was opened against her. In the past, Cook has suggested caution on rate cuts.
Why does this matter? Because markets don’t just react to what the Fed does—they also react to why they think the Fed is doing it. If traders believe decisions are being made to please politicians instead of responding to inflation or growth data, trust in U.S. monetary policy can quickly erode. That trust is one of the main reasons the dollar is still the world’s reserve currency.
- POTENTIAL IMPACT OF FED CUTS ON GOLD AND STOCK PRICES
Stocks: Lower rates usually lift stock prices by making borrowing more affordable and pushing investors out of cash. If the Fed goes through with its currently projected two cuts in 2025, stock prices—especially sectors like tech—could stay supported. But if cuts look politically motivated and not data-driven, the bounce may not last as investors fear future inflation and worry about policy mistakes.
Gold: The metal doesn’t pay interest, so it tends to advance when rates are falling and the dollar softens. Political meddling also creates uncertainty. After Trump’s move against Governor Cook in late August 2025, the gold price rose and then jumped to record highs above $3,500 in early September 2025 as expectations of a September cut solidified.
- LATEST DEVELOPMENTS AND PROBABILITIES: A 50 BASIS POINT CUT?
As of September 9th, speculation has been mounting that the Fed could order a steeper 50-point basis cut when the Fed meets on September 17th or perhaps before the end of the year. Lower-than-expected NFP jobs data and other US data suggest that the US economy could be slowing down. U.S. inflation data on September 12th will be key, but if US inflation comes in comfortably lower than the expected 2.9%, this is expected to increase pressure on the Fed for sharper rate cuts. There is currently an 8% chance of a sharper rate cut in September.
Conclusion
The Fed has a difficult task ahead. Economic data could justify easing, and as of September 2025, markets are braced for rate cuts before year-end. But political pressure threatens to influence those decisions, raising questions about independence.
For stock prices, cuts could mean another move higher, but if the perception is that the Fed is bowing to the White House, a rally may not last. For gold, the story is more straightforward: cuts and controversy both support higher prices.
It’s not only important whether rates go up or down—it’s whether the markets believe the Fed is acting on the numbers, not political pressure. The political independence of the Fed is the cornerstone of U.S. financial stability, and the markets don’t respond well to interference.