ING chief economist sees room for sharp Fed cuts as US growth slows

The Federal Reserve could deliver multiple rate cuts this year as the US economy shows signs of cooling, according to James Knightley, Chief International Economist at ING. He also pointed to weaker jobs data and the temporary inflation bump from tariffs as reasons the Fed may act sooner rather than later.“At the start of the year, there was a lot of optimism about the US economy,” Knightley said, noting that growth forecasts have already been cut from 2.5% to about 1.5% for 2025. “That change in story on the US jobs market really does open the door to those interest rate cuts from the Federal Reserve.”

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Knightley said the quarter of a million downward revisions to jobs data over the past two months had significantly altered the Fed’s view of the labour market. Hiring has been concentrated in just three areas — private healthcare, leisure and hospitality, and government — suggesting a softer employment picture than earlier believed.He expects US inflation to touch 4% in the short term due to tariff-driven price hikes but sees it falling quickly next year, giving the Fed room to ease policy. While geopolitical tensions and trade disputes remain factors for markets, Knightley said there is “a lot of hope and expectation… that the Federal Reserve will be able to come in, offer several rate cuts, get some stimulus into the economy.”

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On the global impact of the US tariff hikes, he noted that most economies, including India, are not heavily reliant on US-bound exports for growth. In fact, the situation could prompt some countries to diversify trade relationships, which might create new opportunities outside the US market.

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