Investors are pricing in a high probability of a Federal Reserve rate cut in September, following a cooler-than-expected inflation report for July. The data shows that markets believe there’s a 96% chance of a base rate reduction.
The Fed is under pressure from Treasury Secretary Scott Bessent and President Trump to consider a larger rate cut to offset missed opportunities earlier this summer. However, analysts warn that core inflation rising to 3.1% and upcoming jobs data could still delay action.
Core inflation has sparked debate over its significance in the Fed’s decision-making process. While some analysts see it as a factor worth considering, others argue that it may not be enough to change the course of events.
Analysts from various firms have weighed in on the matter. Deutsche Bank’s Jim Reid notes that investors are overly optimistic about a September cut, while UBS Global Wealth Management’s Mark Haefele remains confident that the Fed will resume rate cuts at the September meeting and continue cutting for 100 basis points.
The FOMC’s decision is expected to be influenced by data on labor market trends. The upcoming jobs report in September is seen as crucial in determining the fate of the rate cut. As one analyst puts it, “Jobs data released in September will hold more sway over the Fed’s decision.”
For now, markets are focusing on the possibility of a rate cut and its potential impact on interest rates. However, with core inflation rising to 3.1%, some analysts caution that a larger reduction may not be imminent.
Source: https://fortune.com/2025/08/13/markets-september-rate-cut-bessent-50-bps-call