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The US Federal Reserve is facing pressure over whether to cut interest rates by a larger-than-expected 50 basis points next week or by just 25 basis points, with futures markets predicting a smaller cut at next week’s meeting.

With a cut expected next week, it will be the first time in more than four years that the US central bank has eased monetary policy and kept interest rates at a 23-year high of 5.25% - 5.5% since July last year.

Top Fed officials have recently backed a series of cuts amid signs of cooling inflation. The central bank is focused on preventing the undue negative effects on the economy of keeping interest rates high for an extended period.

However, a debate is brewing among officials over how quickly to cut rates and how to get them to “neutral” levels without hampering growth.

A 50 basis point cut in September would help the Fed return borrowing costs to normal levels more quickly, reducing the risk of a drag on the economy and preventing further deterioration in the labor market.

Policymakers did not issue a warning about the U.S. economic outlook, but they did say downside risks could increase. Minutes from last month’s meeting showed some officials suggested the central bank could cut rates at its next meeting. In addition, jobs and inflation data are also pushing for a more aggressive cut.

Last month, Fed Chairman Jerome Powell said the Fed would do “whatever it takes to support the labor market as it makes further progress toward its price stability goal.”

Meanwhile, Fed Governor Christopher Waller said last week that he was “open-minded about the size and pace of cuts” and would support larger cuts based on economic data. However, he expected any move to be “cautiously implemented.”

Fed Chairman John Williams said late last week that he had not yet made a decision on the size of a rate cut this month, adding that the central bank was “well positioned” to achieve its inflation and employment goals.

However, according to the Financial Times, the Fed's 50 basis point interest rate cut will bring risks.

Recent data has shown mixed trends. The most recent jobs report showed slower monthly gains, but also a lower unemployment rate and rising wages. Moreover, price pressures are also easing as inflation cools.

A 50 basis point rate cut could therefore also raise concerns that the central bank is concerned about the economic outlook. It could also prompt markets to expect a steeper cut, exceeding the Fed’s planned pace of easing.

“The argument for 50 basis points can be made, but the information around it is very complicated and the central bank has no good reason to do it,” said Loretta Mester, former Cleveland Fed president who retired in June.

A deeper cut also risks causing political problems. Republican presidential candidate Donald Trump has warned the Fed against cutting rates in September, just weeks before the election.

Mr. Powell recently said that the Fed would “never use its power to favor or oppose a political party, a politician or any political outcome.”

Futures markets are pricing in a 1 percentage point rate cut by the Fed later this year.