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Highlights
- The FedWatch tool predicts a 94.4% chance of a Fed interest rate cut in September.
- The odds of the Fed's decision to hold interest rates unchanged stands at 5.6%.
- BlackRock CIO Rick Rieder foresees a potential 50-basis-point interest rate cut in September.
The Federal Reserve’s upcoming interest rate decision in September is poised to be a critical moment for the economy, with market expectations leaning heavily towards a 25-basis-point rate cut. The weak July jobs report has sparked concerns about economic growth, increasing the likelihood of a Fed rate cut to 94.4%.
Will there be a Fed Rate Cut in September?
Following the US Fed’s recent decision in July to hold the interest rate unchanged at 4.25% to 4.5%, all eyes are on the central bank’s move in September. With job creation figures consistently falling short of estimates, traders are betting on a swift response from the Fed to address the emerging weakness.
According to CME FedWatch, there’s currently a 94.4% chance of a 25-basis-point rate cut during the September 17 FOMC meeting. This represents a notable increase from 89.1% earlier in the day.
One possible reason for the increase in the odds of a September rate cut is the fact that Trump has revealed plans to appoint a Fed Governor who supports rate cuts to replace outgoing Governor Adriana Kugler. Kugler had so far opposed a rate cut this year and could have again voted in favor of holding rates steady in September if she remained on the board till then.
Notably, the Fed maintained interest rates between 4.25%-4.50% since December 2024, with no changes for five consecutive meetings. However, a disappointing July 2025 jobs report significantly shifted market expectations. Prior to the report, the likelihood of a September rate cut was around 39%, but it surged to over 80% afterward. This dramatic shift highlights the market’s sensitivity to new economic data and its potential impact on monetary policy decisions.
Half-Point Cut on the Horizon?
While the CME Group’s FedWatch tool predicts that the 25-basis-point cut is likely, BlackRock CIO Rick Rieder asserts that a potential 50-basis-point interest rate cut in September is possible. As CoinGape reported on August 1, the US Bureau of Labor Statistics reported that nonfarm payrolls increased by 73,000 in July, much below the expected 147,000.
Rieder believes that the US Fed will ease monetary policy by the end of 2025. He predicts two to three rate cuts in 2025 in response to inflationary pressures and consumer spending trends. This forecast aligns with BlackRock’s institutional market outlook, which anticipates a resumption of rate cuts in the fourth quarter. The expectation is that the Fed will adopt a more accommodative stance, prioritizing economic growth and maximum employment.
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