Key highlights:

• We expect the first Fed rate cut (of 25bps) will now be in September, as the Fed sees rising downside labour market risks and as it manages political risks.
• Our broader outlook is little changed. We still expect a total 50bps of cuts by the end of this year, and a further 75bps in 2026. This would leave the target range at 3.00-3.25% – around what the Fed considers neutral.
• The challenges facing the Fed have not changed – with elevated inflation and (expected) rising unemployment to push the Fed in opposite directions.
• We still expect a gradual easing cycle as the Fed manages the risk of second-round inflation effects from tariffs and navigates considerable political pressure. Uncertainty around the forecast profile is wider than normal.

Find out more in NAB’s US Economic Update (26 August 2025)