What’s Happening at the Fed — September 2, 2025
The Federal Reserve is approaching a pivotal moment: the September 16–17 FOMC meeting. All eyes are on whether the Fed will implement its first rate cut since 2024.
In the past three months, job growth has slowed sharply, averaging just 35,000 new positions—levels not seen since the aftermath of the 2008 financial crisis. Still, the unemployment rate holds steady at 4.2%, and wage growth of about 4% continues to match inflation—leaving policymakers divided. Some see creeping weakness, while others attribute the slowdown to labor supply constraints. Overall, markets are pricing in a 25-basis-point rate cut in September, though the Fed’s response will depend on upcoming jobs and inflation data. Reuters+13Reuters+13Morningstar+13
Federal Reserve Governor Christopher Waller has publicly endorsed a move toward rate cuts—starting in September and potentially extending over the next 3 to 6 months—while keeping a moderate approach (no aggressive 50-basis-point cut, at least initially). Reuters
Meanwhile, Fed Chair Jerome Powell’s dovish tone from the Jackson Hole conference has pushed markets further toward rate cut expectations. Stocks rallied, yields dropped, and rate-cut betting moved toward nearly a 90% probability of easing in September. Kiplinger+15Reuters+15Reuters+15
Why Retirees Should Care
1. Income from Bonds and Savings Will Face Pressure
Most retirees depend on yield-bearing investments—CDs, Treasury bills, and premium savings accounts. If the Fed cuts rates, your future income from fixed-income sources may fall. MarketWatch+1
2. Mortgage and Loan Rates May Dip—But Slightly
A 25-basis-point Fed cut may only marginally lower mortgage rates—expect modest relief rather than dramatic savings. CBS News+2Reuters+2
3. Stock Market Sentiment Could Be Boosted
Rate cuts typically spur market gains. However, retirees should stay cautious—rebalancing allocations and avoiding overexposure to rate-sensitive sectors is key.
4. Political Risk: Fed Independence Under Threat
Controversy is swirling as President Trump reportedly attempted to fire Fed Governor Lisa Cook, sparking legal action and raising serious questions about central bank autonomy. If political interference becomes more normalized, retiree planning could face increased volatility and inflation risks. The Wall Street Journal+15The Wall Street Journal+15Kiplinger+15
What You Can Do Now
- Stick with Liquid Short-Term Holdings: Avoid locking into long-term bonds or CDs until the Fed acts. Staying flexible for rate changes may benefit your cash flow. Kiplinger
- Diversify Your Income Mix: Consider a blend of cash, short-duration bonds, and equities to balance yield and growth.
- Recheck Your Fixed Income Strategy: If you’re holding short-term instruments, evaluate whether securing current yields before a cut makes sense.
- Reassess Mortgage and Debt Plans: If you’re refinancing or planning debt payoffs, even marginal rate improvements can translate to savings.
- Schedule a Mid-Year Review: With policy shifts ahead, now is a strategic moment to revisit your retirement blueprint—with special attention to yield, inflation, and Fed-related risk.
Final Thoughts
As of September 2, the Fed sits at a critical inflection point. Slowing job gains, tempered wage growth, and dovish signals from Powell and Waller are tilting the market toward rate cuts—while political pressure threatens the Fed’s independence.
For retirees, the key is preparedness over reaction. Small shifts in policy can have outsized effects on yield, liquidity, and long-term financial health. Staying informed and flexible will help keep your strategy steady through these uncertain times.
Thomas Clark is a Series 65 licensed investment advisor and experienced trader. He specializes in investing, retirement planning, and market analysis, helping individuals build wealth and make informed financial decisions.