The United States Federal Reserve is expected to lower interest rates this week for the first time in 2025, marking a shift in monetary policy as signs of a cooling labour market emerge.

Yet, the decision comes under the shadow of political pressures and turmoil within the central bank’s leadership.

Since its last move in December, the Fed has held interest rates steady in the 4.25 to 4.50 per cent range, seeking to balance the impact of tariffs imposed under President Donald Trump with persistent inflation risks.

Policymakers now appear ready to cut rates by 25 basis points at the end of their two-day meeting on Wednesday, with investors watching closely for signals on how far and how fast the easing cycle may proceed.

“What’s interesting is that it’s very clear what the Fed is going to do when they meet,” said Josh Lipsky, chair of international economics at the Atlantic Council. “Yet, despite that, there’s high drama around this meeting.”

The drama centres not only on the economic outlook but also on political and institutional strains.

The expected rate reduction follows months of public and private pressure from President Trump, who has consistently urged the Fed to lower borrowing costs. Although the Fed is structured as an independent institution, Trump’s interventions have raised questions about the potential for political influence over monetary policy.

The president has also become entangled with the Fed’s leadership. Earlier this year, Trump abandoned threats to dismiss Fed Chair Jerome Powell over renovation costs at the bank’s Washington headquarters. However, in August, he attempted to oust Fed Governor Lisa Cook, citing allegations of mortgage fraud.

Cook, the first Black woman to serve on the Fed’s board of governors and a Biden-era appointee, has mounted a legal challenge to her removal. She remains in her post while the case proceeds, with potential implications for the independence and security of tenure for other central bank officials.

The same month, Governor Adriana Kugler stepped down unexpectedly, creating a vacancy that Trump quickly sought to fill. His nominee, Stephen Miran—currently chair of the White House Council of Economic Advisers- has drawn scrutiny from Democrats for proposing only to take a leave of absence, rather than resign, from his administration role if confirmed.

A Senate panel has advanced his nomination, and if approved by the Republican-controlled chamber, Miran could participate in the Fed’s next rate-setting meeting.