First Fed Rate Cut of 2025: A New Beginning or Just a Step Toward More Easing?

Economic

Summary:

The U.S. Federal Reserve is expected to announce its first rate cut of 2025 this week, but investors are more concerned with how many more cuts may follow...

Fed’s First Rate Cut of 2025 and Market Expectations

The U.S. Federal Reserve is widely anticipated to announce its first interest rate cut of 2025 during its meeting this Wednesday, likely reducing rates by 25 basis points. This would mark the first easing of monetary policy since December, signaling a shift from the aggressive rate hikes of the past few years.

However, the main concern among investors is whether this rate cut will be an isolated action or the start of a series of reductions. The Fed is navigating a complex economic landscape, where a weakening labor market and persistent inflationary pressures make future decisions particularly challenging.

The Role of the Fed’s “Dot Plot” and Political Pressures

An important indicator of the Fed’s future policy trajectory will be the updated "dot plot" a quarterly chart showing the interest rate expectations of Fed officials. The June 2025 dot plot showed a consensus for two rate cuts in the year, but with the current economic uncertainty, further cuts are still a subject of debate.

The political landscape also adds another layer of complexity. President Donald Trump has repeatedly criticized Fed Chair Jerome Powell for acting too late on rate cuts and has been pushing for a more dovish approach. He is also working to install his economic advisor, Stephen Miran, as a Fed governor, further influencing the central bank’s policy direction.

Diverging Views: Fed’s Caution vs. Wall Street's Expectations

Former Fed officials like Loretta Mester remain cautious, arguing that a single 25 basis point cut is unlikely to resolve the political pressure on the Fed. Mester believes that while a modest cut could help ease labor market pressures, it won’t signal a sustained easing cycle.

In contrast, Wall Street experts are more optimistic. Morgan Stanley predicts that the Fed will continue cutting rates in subsequent meetings in October and December, ultimately reducing the target rate to 3.5% by January 2026. Other economists, such as Luke Tilley from Wilmington Trust, forecast three consecutive cuts over the next three meetings, driven by weakening labor market data.

Inflation and Employment Data Impacting Fed’s Decision

Despite the push for easing, inflation remains a persistent concern. The latest data shows that inflation is stuck around 3%, which is above the Fed’s target. Additionally, the labor market is showing signs of weakness. In August, the U.S. economy added only 22,000 jobs, far below expectations of 75,000. This slowdown in job creation, coupled with an increase in the unemployment rate to 4.3%, could prompt the Fed to prioritize supporting labor markets over controlling inflation.

Former Fed Kansas City President Esther George emphasized that while inflation is still a concern, the Fed’s next moves will depend heavily on how the central bank perceives the “restrictiveness” of its current policy.

The upcoming rate cut by the Fed is a pivotal moment, but the bigger question is whether it marks the beginning of a broader easing cycle or if it will be a temporary adjustment. With the U.S. economy facing a weaker labor market and persistent inflationary pressures, the Fed’s next steps will have significant implications for both economic growth and inflation management. The central bank will need to strike a delicate balance as it navigates the complexities of monetary policy in 2025.

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Economic

Historic Agreement Marks New Era for Nuclear Energy

In a groundbreaking move, the U.S. and UK have signed a historic agreement to jointly advance nuclear energy, marking the beginning of what both countries are calling a "golden era" for the sector. The deal, set to be announced during U.S. President Donald Trump's visit to the UK, is aimed at reducing reliance on traditional energy sources and addressing the global energy crisis while fostering economic growth and long-term energy security.

The agreement includes a commitment to streamline nuclear reactor licensing processes, with both countries aiming to cut the approval time for new projects from 3-4 years down to just 2 years. This will accelerate the development of next-generation nuclear power plants and related infrastructure, creating new opportunities for innovation and economic growth.

Strategic Partnerships and Major Investments

The partnership involves large-scale projects and investments. One of the key initiatives includes the collaboration between U.S.-based X-Energy and UK’s Centrica to develop up to 12 advanced modular reactors (AMRs) in the northeast of the UK. Chris O'Shea, CEO of Centrica, emphasized that this cooperation would help create a sustainable, affordable, and low-carbon energy system.

Additionally, a major £11 billion ($15 billion) project is underway to develop data centers using small modular reactors (SMRs) in central England, specifically at the site of the former Cottam coal plant. This project involves significant players like Holtec International (U.S.), EDF (France), and Tritax, with thousands of local jobs expected to be created.

Nuclear Collaboration to Improve Efficiency and Speed

One of the most innovative aspects of the agreement is the shared approach to nuclear management. The deal allows one country’s nuclear reactor safety findings to be used in the other country’s licensing processes, dramatically cutting down the time required for reactor approvals. This collaboration aims to make nuclear energy projects more efficient and timely, enabling faster deployment of clean energy solutions.

The UK government has also committed £14 billion ($19 billion) to the Sizewell C nuclear plant and is backing Rolls-Royce's development of the UK's first SMR. Meanwhile, Rolls-Royce is also extending its efforts in the U.S. to manage its reactors, creating new job opportunities and investment across both nations.

Long-Term Strategic and Economic Benefits

British Prime Minister Keir Starmer expressed confidence that the agreement would usher in a "golden age" for nuclear energy, noting that it would reduce household energy bills over the long term while creating thousands of good jobs in the short term. The deal is expected to bring both economic and strategic benefits, enhancing energy security by reducing dependence on traditional energy sources and improving resilience against market fluctuations.

U.S. Energy Secretary Chris Wright underscored that the agreements provide a framework for both nations to access the commercial potential of nuclear energy, with additional focus on advancing technology and investments in UK data centers.

The historic nuclear energy agreement between the U.S. and UK signals a transformative shift in the global energy landscape. By accelerating nuclear power development, reducing regulatory hurdles, and fostering cross-border collaboration, this deal lays the groundwork for a more sustainable, secure, and economically prosperous future. As both countries lead the way in nuclear innovation, this partnership is expected to be a major driver in the global push for clean energy solutions.

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Political

Barter Trade Resurges in Russia Due to Sanctions Pressure

For the first time since the 1990s, barter trade has resurfaced in Russia’s foreign trade system, driven by the heavy sanctions imposed by the U.S., Europe, and their allies. With more than 25,000 sanctions targeting Russia’s $2.2 trillion economy, the country has been cut off from the global SWIFT payment network, which has prompted businesses to turn to goods-for-goods exchanges to maintain trade relations.

Russia’s efforts to bypass the global financial system include exchanging wheat for Chinese cars, flax for construction materials, and even metals for machinery. This return to barter has become an essential method for avoiding secondary sanctions, particularly as Chinese banks, wary of U.S. penalties, are hesitant to engage in financial transactions with Russian entities.

Russia’s Economic Shift: From Fiat to Barter

The shift to barter has been officially encouraged by Russia’s Ministry of Economic Development, which released a 14-page guide in 2024 to help businesses navigate this new form of trade. The guide also proposes the establishment of a barter exchange platform, which would enable companies to swap goods and services without international financial transactions.

Although this method was previously of little interest to the market, recent data from customs and business sources show at least eight barter deals, including exchanges of Russian wheat for Chinese vehicles, flax for household goods and building materials, and even services for raw materials. These trades are valued at around $100,000 and represent a growing trend as Russia adapts to its isolated economic position.

Impact of Sanctions and the Push for De-Dollarization

Maxim Spassky, a representative of the Russian-Asian Business Union, highlighted three key factors driving the rise in barter trade: de-dollarization, sanctions pressure, and liquidity issues with trading partners. With global trade increasingly moving away from the dollar, Russia is seeking alternatives to ensure continued commerce without reliance on Western financial systems.

The shift to barter is also evident in trade data discrepancies between the Central Bank of Russia and its customs service, with a reported trade imbalance of $7 billion in the first half of 2025, likely caused by hard-to-track barter transactions.

Russia's Economic Landscape: Surviving Sanctions Through Alternative Methods

In response to the financial blockade, Russian businesses are turning to a variety of methods to keep operations running. These include using payment intermediaries, leveraging VTB Bank in Shanghai, and even using cryptocurrencies linked to the U.S. dollar to circumvent traditional banking systems.

Sergey Putyatinsky, a financial executive at BCS, noted that smaller businesses are heavily using cryptocurrencies. He explained that companies are employing multiple strategies, such as using cash, offsetting debts, or splitting accounts across various banks, as they adapt to the challenging environment. However, he pointed out that there is no comprehensive technological payment solution in place, and Russia's economy is surviving by experimenting with multiple payment methods simultaneously.

The resurgence of barter trade in Russia highlights the deepening impact of international sanctions and the country's shift toward alternative economic systems to maintain global trade. While the return to barter is not an ideal solution, it allows Russia to continue trading vital goods and services despite being cut off from traditional financial systems. As the country faces ongoing economic challenges, this shift marks a critical moment in the evolution of global trade practices, with Russia exploring new pathways for financial independence.

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Commodity

BRICS Nations Hold Over 6,000 Tons of Gold, Strengthening De-Dollarization Efforts

The BRICS bloc (Brazil, Russia, India, China, and South Africa) now holds over 6,000 tons of gold, roughly 20-21% of global central bank gold reserves. This significant gold accumulation is seen as a strategic move to reduce the bloc's dependence on the U.S. dollar for international trade, a process known as de-dollarization.

As of the latest data, Russia owns 2,335.85 tons of gold, China holds 2,298.53 tons, and India possesses 879.98 tons. Brazil and South Africa hold smaller amounts, with 129.65 tons and 125.47 tons, respectively. Together, Russia and China control approximately 74% of BRICS’ total gold reserves. These countries have been aggressive in their gold purchases, strengthening their financial standing and minimizing the risks associated with currency fluctuations.

Gold as a Strategic Shield for De-Dollarization

The accumulation of gold is not just for wealth preservation but also serves as a "shield" in BRICS' effort to reduce reliance on the U.S. dollar in global trade. Gold helps stabilize value amidst currency volatility, offering a tangible asset base that BRICS can use to develop alternative financial systems that bypass the dollar.

Between 2008 and 2021, BRICS' share of global gold reserves surged from 5% to 22%, reflecting the bloc's growing investment in gold. This shift supports ongoing discussions about a potential BRICS currency backed by gold, providing an alternative to the U.S. dollar-dominated global financial system.

Gold Reserves Boost BRICS’ Financial and Strategic Ambitions

BRICS’ large gold reserves help the group achieve more than just financial security. The gold reserves bolster BRICS' ability to create a new monetary system based on tangible assets, further distancing the bloc from Western fiat currencies. This shift supports the group's drive to conduct trade in local currencies, bypassing the need for USD in international transactions.

Despite challenges in building the necessary infrastructure for a shared gold-backed currency, BRICS’ substantial gold holdings lay the foundation for new monetary solutions. These reserves have the potential to shift global financial power away from the U.S. dollar, enhancing the economic leverage of emerging markets over Western economies.

Path Forward: Challenges and Opportunities

While the idea of a gold-backed BRICS currency faces hurdles, such as infrastructure and coordination between member countries, the bloc's gold reserves have already established a solid foundation for alternative financial solutions. This movement toward de-dollarization is gradually altering the global financial order, presenting opportunities for emerging markets to increase their economic influence relative to Western powers.

As BRICS continues to explore direct currency settlements in trade and builds frameworks for financial independence, its growing gold reserves will play a critical role in reshaping the global economic landscape.

The BRICS bloc’s strategic accumulation of gold underscores its ongoing efforts to reduce dependence on the U.S. dollar and develop a new, asset-backed financial system. While challenges remain in fully implementing a gold-backed BRICS currency, the substantial gold reserves position the group to gradually reshape the global financial order and enhance the standing of emerging economies in the process.

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Commodity

Oil Prices Steady as Market Watches Russian Supply Risks

Oil prices saw minimal movement early on Tuesday, maintaining a steady stance after a small rise in the previous session. Brent crude futures edged up by 4 cents to $67.48 per barrel, while U.S. West Texas Intermediate (WTI) crude rose 2 cents to $63.32. On Monday, both benchmarks saw gains, with Brent settling 45 cents higher and WTI up 61 cents.

The market remains focused on potential disruptions in oil supply from Russia after a recent escalation in Ukrainian drone attacks targeting Russian energy infrastructure. The attacks are seen as part of Ukraine's strategy to undermine Russia's war capabilities, and have intensified fears of supply interruptions from a major oil producer that accounts for over 10% of global oil output.

Supply Fears Push Oil Prices Up

According to Tony Sycamore, an analyst at IG, the heightened concerns over Russian supply disruptions are helping to support oil prices. The market is wary of the ongoing conflict and its potential impact on global energy markets, especially as Russia is a significant producer of crude oil and natural gas.

Another factor influencing the oil market is the anticipation of the U.S. Federal Reserve’s monetary policy meeting from September 16-17. The Fed is widely expected to cut interest rates, which could boost demand for oil as lower borrowing costs tend to stimulate economic activity, including energy consumption.

Additionally, a weaker U.S. dollar is providing some support to oil prices. The dollar index, which measures the greenback's strength against six other currencies, fell to a near one-week low, making oil cheaper for holders of other currencies. A weaker dollar typically makes commodities like oil more affordable in other markets, which can increase global demand.

Middle Eastern Tensions Add to Risk Profile

Tensions in the Middle East also contribute to the risk profile of oil supply. The Israeli military's ongoing ground offensive in Gaza, reported by Axios, adds to concerns about regional stability, which could further impact oil markets in the event of increased geopolitical conflict.

Meanwhile, a breakthrough in U.S.-China relations could also play a role in supporting oil demand expectations. U.S. and Chinese officials reached a framework agreement on transferring the ownership of the TikTok app to a U.S.-controlled entity. Previous easing of U.S.-China trade tensions has historically improved risk sentiment and boosted expectations for oil demand, as it signals more stable global economic conditions.

Oil prices are navigating a complex landscape of geopolitical tensions, supply risks from Russia, and expectations surrounding U.S. monetary policy. While the market is stable for now, ongoing concerns about energy infrastructure attacks, potential rate cuts by the Federal Reserve, and Middle Eastern conflicts could continue to drive price fluctuations in the near term.

Source: Reuters

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Economic

Trump's Push for Less Frequent Earnings Reports Gains Momentum

The U.S. Securities and Exchange Commission (SEC) announced that it is prioritizing a proposal from former President Donald Trump, which seeks to reduce the frequency of corporate earnings reports from quarterly to semi-annually. This proposal, which Trump reiterated through a social media post earlier this week, aims to ease the regulatory burden on companies and stimulate business growth by reducing the frequency of financial disclosures.

Trump's call for an end to quarterly reporting has sparked renewed debate over the need for transparency in the financial markets. While proponents argue that less frequent reporting could help companies focus more on long-term growth, critics contend that it could reduce investor visibility and weaken accountability, ultimately harming public trust in corporate governance.

SEC's Response and Regulatory Agenda

In response to Trump's proposal, the SEC confirmed it is actively pursuing the idea as part of its ongoing efforts to eliminate unnecessary regulatory burdens on businesses. The commission's focus aligns with broader discussions about how to balance corporate transparency with the goal of fostering economic growth.

The proposal would mark a significant shift in corporate reporting practices. Currently, public companies in the U.S. are required to disclose their earnings on a quarterly basis, a rule intended to provide investors with timely information about a company's financial performance and outlook.

Supporters and Critics of Quarterly Reporting

Supporters of reducing the frequency of earnings reports argue that quarterly earnings calls force companies to prioritize short-term financial results at the expense of long-term strategy and innovation. By alleviating this pressure, businesses would have more time to focus on strategic growth without the constant scrutiny of Wall Street.

On the other hand, critics of the proposal argue that quarterly reports provide essential information to investors, allowing them to make informed decisions about their investments. Reducing the frequency of these reports could lead to less market transparency, making it harder for investors to gauge the health and prospects of companies.

Next Steps for the SEC

The SEC’s involvement in this debate signals the potential for significant changes to corporate reporting requirements. However, any change to the rule would require extensive consultation with industry stakeholders, including investors, regulators, and businesses, to weigh the potential benefits and drawbacks.

As the SEC moves forward with examining Trump’s proposal, the outcome could have far-reaching implications for both companies and investors in the U.S. financial markets.

The SEC's decision to prioritize Trump’s proposal to cut quarterly earnings reports underscores the ongoing tension between regulatory oversight and the desire to reduce business burdens. While the debate continues, the SEC's actions may reshape corporate transparency and reporting practices, with significant consequences for both market participants and the broader economy.

Source: Bloomberg

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Miran's Confirmation as Fed Governor

On Monday, Stephen Miran, nominated by President Donald Trump, was confirmed by the Senate to serve on the Federal Reserve Board of Governors, just before the Fed’s crucial two-day monetary policy meeting began. The Senate approved Miran by a narrow vote of 48-47, with Senator Lisa Murkowski of Alaska being the only Republican to oppose the nomination.

Miran is set to fill the remaining term of former Fed Governor Adriana Kugler, which is set to expire in January 2026. Miran, who currently holds a key role in the White House, will take an unpaid leave from his post while serving on the Fed board. This marks the first time in the Fed's 111-year history that a sitting Fed governor is also technically an employee of the president.

A Tense Moment for the Fed’s Independence

Miran’s confirmation comes at a pivotal time for the Federal Reserve, as President Trump has consistently pressured the central bank for not cutting interest rates to boost economic growth. Trump's administration has launched an unprecedented campaign against the Fed, including personal attacks on Fed Chairman Jerome Powell and a failed attempt to fire Fed Governor Lisa Cook.

Despite this political pressure, Miran expressed during his Senate confirmation hearing that he values the independence of the Fed and intends to carry out his duties without political interference. He emphasized the importance of adhering to ethics rules and federal law while serving on the board.

Democratic Concerns Over Miran's Ties to Trump

Miran's nomination has been met with skepticism from some Democrats, who raised concerns about his ability to remain independent, given his close ties to President Trump. Miran's previous work as chair of the Council of Economic Advisers and his paper criticizing the revolving door between the White House and the Fed added to the political tension surrounding his confirmation.

During his hearing, Miran defended his position, stating that his paper only suggested reforms to the Fed and emphasized the importance of democratic oversight. He reassured senators that he would maintain independent thinking, pointing to his willingness to challenge consensus views.

Implications for the Fed and U.S. Economy

Miran's confirmation signals an ongoing shift in the Fed's dynamics as Trump seeks to reshape the central bank to better align with his economic goals. As the U.S. labor market weakens and inflationary pressures rise due to Trump’s tariffs, Miran’s role on the Fed’s Board could influence future monetary policy decisions, including interest rate cuts, which are expected in the coming months.

Miran’s confirmation is seen as a critical milestone in Trump’s efforts to assert more influence over the Federal Reserve, raising important questions about the central bank’s political independence and its role in managing the U.S. economy.

Stephen Miran’s confirmation to the Federal Reserve Board marks a significant political moment, as it follows a period of intense pressure on the central bank by the Trump administration. While Miran has pledged to uphold the Fed’s independence, his close ties to Trump and the ongoing tensions over monetary policy will continue to fuel debate about the Fed's autonomy and its ability to navigate political influence.