Two more Fed rate cuts likely as US economy slows, says ING’s Knightley

The US economy is navigating a period of significant uncertainty, with the Federal Reserve expected to deliver two more interest rate cuts this year despite disruptions in data collection caused by the government shutdown, according to James Knightley, Chief International Economist at ING.

“I think there is still enough evidence out there, even with the government shut down… to trigger another rate cut in October and we think also another rate cut in December as well,” Knightley said. He added that while the market, economists, and the Fed appear aligned on two cuts this year, expectations for next year remain divided.

According to the CME FedWatch Tool, the next US Federal Reserve meeting is scheduled for October 29, 2025. Markets are pricing in a 95.7% chance of a rate cut to 3.75–4.00%, while 4.3% expect the Fed to hold rates steady at the current 4.00–4.25% range.

He pointed to the Fed’s Beige Book — an anecdotal survey of the US economy based on insights from businesses, trade groups, and unions — as an important gauge of current conditions. Knightley said the latest edition painted a subdued picture. “There were indications of more loss of economic momentum, more weakness in the jobs market as well,” he said. Combined with Chair Jerome Powell’s recent comments suggesting little improvement since the September meeting, this supports the case for further monetary easing.

Also Read: Why Ed Yardeni says the Fed’s September rate cut was unnecessary

Knightley stated that while the shutdown has furloughed statisticians and created gaps in official economic releases, the Federal Reserve, which operates with separate funding, continues to access critical information.

Outlining possible paths for the US economy, Knightley described two contrasting scenarios. In a more optimistic case, easier financial conditions — driven by rate cuts, lower Treasury yields, and a weaker dollar — could combine with improved clarity on trade to boost sentiment, investment, and hiring. In such an environment, the Fed might not need to continue cutting rates aggressively.

Also Read: RBI holds repo rate at 5.5%, economists see room for future easing

However, the risks are considerable. “The trade tariffs do start to bite. We do see squeezed spending power in America, we do see squeezed corporate profit margins in America,” he warned. A weaker labour market could further erode consumer confidence, a key concern since household spending drives around 70% of US economic activity. Adding to the challenges, the housing market has seen five consecutive monthly declines in property prices, threatening household wealth.

Positioning ING’s stance, Knightley said, “We’re somewhere in the middle. We’re cautiously optimistic, but we do think it’s probably going to take more than one rate cut to turn things around.” He concluded with a clear forecast: “We think we are looking for two [rate cuts] this year and at least another two rate cuts next year.”

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here