Wall Street Doomsday Analysts Prepare for the Start of the Week
Analysts prepare for the start of the week as Fed cuts rates for first time in 9 months while Trump visits UK for major tech deals.
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Sep 14 2025
Interest Rate Cut and State Visit to London
The highlight of the week will be the interest rate decision. You could already call it an interest rate cut because the likelihood of this happening is almost certain. On Wednesday at 9:00 PM Israeli time, the Fed will publish its decision. Half an hour later, the Fed chairman will hold a press conference in which he will detail what led the Federal Reserve to lower interest rates (yes, that's what's going to happen).
But here comes the surprise: the fact that the Fed will lower interest rates by 25 basis points is a pretty absolute fact. The question is what the bank thinks about the future. What will the pace look like going forward? Can we even expect a cut of more than 25 basis points? About 10% believe so.
Behind the interest rate cut, there is quite a bit of data that supports monetary easing data that the Fed has been waiting for while sitting on the fence for months. For months, the American market has been transmitting a kind of resilience, but in recent weeks, cracks have begun to appear.
Employment indicators have weakened, consumer confidence surveys have fallen to 55.4 points, and inflation has converged toward the Fed's target but is still far from it at an annual rate of 2.9%, with the latest CPI index showing an annual rate of 2.9%, in line with expectations.
But perhaps the most dramatic figure that explains the change in tone that we are going to see from the Fed is the backward revision of 911,000 jobs, a retroactive update to the employment data for the past year. In other words, the entire recent period that seemed like a strong and functioning labor market turned out to be a hidden employment crisis. The indicators told a story of stability, but the reality was completely different. In retrospect, the American economy lost almost a million more jobs than it appeared to, and that completely changes the picture.
The Fed finds itself in a dilemma. On one hand, inflation is still higher than the target, with an annual index of 2.9% that refuses to cool down. But on the other hand, the labor market is signaling weakness that requires the Federal Reserve to intervene.
In such a situation, it is difficult to see the Fed remaining on the fence, so an interest rate cut next Wednesday is almost certain. The big question is not what will happen this week, but what will happen after it. Is this the beginning of a pivot, or a single move that will only balance the situation? That is the million-dollar question.
According to Fed Fund Futures, the capital market is now pricing in a 90% probability of a quarter-point interest rate cut this coming Wednesday, with only 10% of investors estimating that the Fed will go further with a 50-basis-point cut. Analysts make it clear that a sharper cut could be interpreted as a panicked response by the bank, which on one hand could ease monetary policy but on the other hand would show that the bank is very pessimistic about the economy and the future.
Since 1990, the Fed has cut interest rates 55 times, but only 18 of them were by 50 basis points, and only once (in September 2024) was not during an official recession. In other words, if Jerome Powell chooses this exceptional step, investors could interpret it as a message that the problem is much deeper than we all think.
Last Thursday, the Consumer Price Index (CPI) for August was published, which surprised to the upside with a monthly increase of 0.4% and an annual figure of 2.9%, the highest since January. Meanwhile, the housing component, and especially hotel prices (+2.6%) and flights (+5.9%), were among the main contributors to inflation.
Producer price index actually fell by 0.1%, a negative surprise indicating that the impact of the tariffs imposed by Trump on China, India, and others has not yet fully rolled over to consumers. Certain services actually fell, and the entire sector signaled a slowdown.
On the day of the interest rate cut, the very person who put the most pressure on the Fed to take this step will not be around. On Wednesday, President Trump will land in the UK for a second state visit, which will include a meeting with King Charles and participation in traditional royal ceremonies. On Thursday, he will hold a meeting with Prime Minister Starmer, during which he is expected to receive decisions regarding technological collaborations, led by Nvidia and OpenAI's investment in establishing data centers across the UK.
According to a CNBC report, the two American companies are expected to commit to investing billions of dollars in cloud infrastructure and artificial intelligence in the UK. Beyond the economic importance, this is a significant political move for both sides: one seeks to show commitment to the global economy despite the trade wars, and Britain is still trying to build its independence in the era after separating from the EU Brexit.
What's Going to Happen This Week:
Monday
The Empire State manufacturing index will be published, with an expected moderate increase to 4.3 points, compared to a negative figure of -11.9 points last month.
Tuesday
Retail sales data will be published: the expectation is a 0.4% increase in core sales (excluding vehicles and fuel), while only 0.2% in general sales, a decrease in pace compared to the 0.5% recorded in the previous month.
Wednesday
Interest rate decision will be published, expected to be reduced by a quarter of a percentage point to 4.25%, compared to 4.5% today. Immediately after that, the Fed's quarterly economic forecast, the official statement, and the press conference by the bank's chairman, Jerome Powell, will also arrive, which will set the tone for the markets as mentioned above.
Thursday
Initial jobless claims are expected to come in at 245,000, down from 263,000 last week, a figure that will be closely watched given signs of a weakening labor market. The Philadelphia Fed's manufacturing index is also due, where it is expected to jump to 1.4 points, after a negative reading of -0.3 in the previous month.
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
