Crucial for the market's fate in the coming months! How many more times will the Federal Reserve cut interest rates?

This week, it is widely expected that the Federal Reserve will implement its first rate cut of 2025, but for investors, the bigger question is how many more rate cuts will follow as the Fed deals with a weakening job market, sticky inflation, and increasing pressure from the White House?

The clues may be hidden in the Fed’s “dot plot,” a chart updated quarterly that shows each official’s forecast for future benchmark interest rates.

The previous dot plot released in June showed that, amid uncertainty over how the Trump administration’s tariff, immigration, and tax policies would affect the economy, Fed officials generally expected two rate cuts this year. Most Fed watchers predict the central bank will cut rates by 25 basis points this Thursday.

Will policymakers stick to their previous forecasts, or will they become more aggressive?

The Fed still has two policy meetings scheduled this year, at the end of October and early December.

The Fed has kept its benchmark rate in the 4.25%-4.5% range for most of 2025, which has tested the patience of U.S. President Trump, who is trying to install White House economic adviser Milan into the Fed before the policy meeting and remove current Fed Governor Cook.

Trump has repeatedly attacked Powell for not cutting rates sooner, often calling him “Mr. Too Late.”

Former Cleveland Fed President Mester stated that she is “not convinced” that one or more rate cuts would ease the Fed’s political pressure. “The President has said he wants to get his people onto the board and wants to cut rates quite aggressively,” she said. “He seems less concerned about whether monetary policy is independent and free from short-term political factors.”

However, she does not expect the Fed to cut rates by more than 25 basis points this week, as policymakers are weighing their dual mandate of maintaining price stability and maximizing employment.

Mester said a smaller rate cut would “reduce the restrictiveness of policy, but it would still be restrictive, putting downward pressure on the inflation part of the dual mandate, while also providing some support for the labor side.”

Mester also does not expect a series of rate cuts to follow this week’s easing.

“They will have to watch the data and make decisions meeting by meeting,” Mester said. “They will try to be careful to maintain balance. If they want to bring inflation down, they will need to keep policy somewhat restrictive. If labor market conditions deteriorate substantially, then they may shift to an easing policy. But we’re not there yet.”

However, Wall Street traders are betting that the Fed will continue to cut rates at the October and December meetings, after which the Fed will pause until next April.

Some forecasts are even more aggressive. Economists at Morgan Stanley said last week that they expect the Fed to cut rates at every meeting until January next year, by which time the target range will fall to 3.5%.

Wilmington Trust Chief Economist Luke Tilley expects that the Fed will remain “noncommittal” on future rate cuts this week, as it tries to balance weak job growth and inflation.

But he does predict that, due to the weak job market, the Fed will cut rates at each of the next three policy meetings.

In fact, Tilley said he expects the Fed to cut rates six times—three times before the end of this year and three times early next year—which would bring the Fed’s policy rate down to the 2.75% to 3% range, as it seeks a so-called neutral level that neither stimulates nor restrains growth.

Tilley said, “If the Fed is considering inflation over a one-year period, then if you have unemployment, there won’t be much inflation.”

He expects weak labor market data to be accompanied by possibly negative GDP. “We expect the U.S. economy to be quite weak, with a 50% chance of recession and a 50% chance of worsening unemployment.”

Former Kansas City Fed President George believes that the real question is how the Fed assesses the restrictiveness of its policy and what its ultimate goal is. Will Fed policymakers begin to restore a bias toward rate cuts and stick with it? Or will they be more cautious and say that any future moves will depend on inflation data?

The latest inflation data has led George to believe that inflation is stagnating at around 3%. She noted that even though tariffs have not caused the price surge many expected, the underlying momentum is still worrying.

Inflation, as measured by the CPI index, showed that core CPI, which excludes volatile food and energy prices, rose 3.1% year-on-year in August, unchanged from July.

Meanwhile, she said, job market data suggests the labor market may be weaker than imagined. In August, the job market added only 22,000 jobs, weaker than economists’ expectations of 75,000, and the unemployment rate rose from 4.2% to 4.3%.

George said, “I suspect that if you look around the table, there will be people who lean more toward the employment mandate rather than the inflation mandate.”