U.S.-China Trade War Fuels Fed’s Urgency for More Rate Cuts
The debate inside the Federal Reserve is heating up again, with Governor Stephen Miran urging policymakers to move aggressively on rate cuts ahead of the October FOMC meeting.
Citing the rising economic uncertainty caused by U.S.-China trade tensions, Miran said the Fed must act swiftly to prevent further damage to growth and investor confidence.
Miran Warns of Rising Downside Risks
Speaking to Bloomberg, Miran explained that the latest trade measures — particularly President Trump’s newly announced 100% tariff on Chinese imports starting November 1 — have created fresh volatility across global markets. He described the situation as a new “tail risk” for the economy, arguing that the central bank should move “quickly and decisively” to bring policy closer to a neutral stance.
“The balance of risks has shifted,” Miran noted, stressing that the probability of a sharp slowdown has increased even compared to just a week ago. His remarks reflect growing concern among Fed officials that a prolonged trade confrontation could weigh heavily on both business confidence and consumer spending heading into the final months of the year.
Markets Expect Another Cut at the October FOMC
Miran’s comments come as traders overwhelmingly bet on another interest rate cut at the October 29 FOMC meeting. Data from the CME FedWatch Tool shows a 96.7% probability of a 25-basis-point reduction, which would mark the second cut of 2025.
Other policymakers have echoed similar sentiments. Governors Chris Waller and Michelle Bowman have both signaled openness to two more rate cuts before year-end, suggesting that the central bank may be preparing for a sustained easing cycle rather than a one-time adjustment.
Powell Hints That Policy Easing Will Continue
Fed Chair Jerome Powell also hinted earlier this week that additional easing is likely. He said the overall outlook has “not changed materially” since the September meeting, when the Fed implemented its first rate cut of the year in response to a weakening labor market and slowing manufacturing data.
Powell emphasized that the Fed’s next moves will depend on “incoming data and evolving risks,” but his tone suggested that policymakers are already leaning toward further accommodation.
Economists warn that if the Fed continues down a path of aggressive cuts, it could have ripple effects beyond traditional markets. Lower interest rates tend to weaken the dollar, often benefiting Bitcoin and other cryptocurrencies as investors seek alternative assets.
For now, the focus remains squarely on the October FOMC meeting, where the Fed is expected to confirm whether this new wave of dovish sentiment will translate into policy action.
Source: Bloomberg
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