Welcome back. We hope everyone is staying cool in this summer heat. Casey is already thinking about fall — or at least, she’s thinking about the Fed’s September meeting. Read on to find out how the Fed compares with other central banks. 

Out of sync

We’re 42 days away from the Fed’s next policy-setting meeting, and markets are growing more certain that committee members will make the first interest rate cut of the year. 

There’s currently a 91% chance the FOMC will lower rates by 25 basis points in September, per data from CME Group. 

The Fed, once acting in lockstep with the Bank of England and the European Central Bank, has diverged in policy recently. 

So far in 2025, the ECB has cut rates twice; first in March and then again in June, putting benchmark borrowing costs more than 2% lower than the US. The June cut marked the European central bank’s eighth consecutive. In July, the ECB held rates, citing concern over uncertain trade policy.

The ECB lowered its inflation forecasts in June, now expecting prices to increase by 1.6% in 2026. Its headline forecast for 2025 is 2%, in line with its target and giving it room to hold off on additional rate cuts. Growth projections, on the other hand, have decreased slightly in response to higher tariff rates on exports to the US. 

The BOE issued a cut in May and held rates in June, citing conflict between Israel and Iran that sent oil prices higher. BOE officials reiterated that interest rates are on a “gradual downward path,” in the words of Gov. Andrew Bailey. 

“The world is highly unpredictable,” Bailey added. 

Fed Chair Powell agrees. Throughout 2025 he has emphasized the importance of monitoring economic data before adjusting policy. 

When asked by a reporter at the ECB’s annual forum in July whether the Fed would have cut rates by now if it weren’t for tariffs, Powell responded with this: 

“So I do think that’s right. In effect, we went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs. We didn’t overreact. In fact, we didn’t react at all; we’re simply taking some time.”

Last month, Powell told reporters that committee members “have made no decision about September,” which was expected, but he added that the central bank is weighing potential risks of waiting too long, including “downside risks to the labor market.” 

Not everyone is convinced that the Fed’s first rate cut will come this fall, though. Bank of America analysts in a recent note suggested that the labor market situation is not as bleak as it may appear: Yes, demand for labor is decreasing, but so is labor supply, leaving the unemployment rate relatively flat. We also know Powell’s primary concern is the unemployment rate. 

BoA analysts also said that internal data shows consumer spending is not meaningfully declining — in fact, it’s increasing. 

A lot can change in 42 days. We’ll be monitoring the situation; you just monitor your inbox.

— Casey Wagner

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📅 October 13-15 | London

• President Trump on Wednesday doubled tariffs on Indian imports to the US, bringing the rate to 50%, effective Aug. 27. The decision was made in retaliation against the country for continuing to purchase Russian oil. 

• Tornado Cash developer Roman Storm was found guilty on Wednesday of conspiracy to operate a money transmission business. The jury was unable to reach a decision on the other two counts, which relate to money laundering and sanctions violations. The government may retry Storm on these two counts. 

• A White House official told CNBC that Apple plans to increase its investment in domestic manufacturing by $100 billion, boosting shares nearly 6% by 1:30 pm ET.

— Casey Wagner