Fed Rate Cut Odds Surge As Powell’s Future Hangs In The Balance

The chances of a Fed rate cut in September are on the rise, driven by the uncertainty over Jerome Powell’s future. This follows reports that U.S. President Donald Trump is considering firing the Fed Chair. Meanwhile, there are also reports that Powell may be considering resignation amid the investigation into the renovation project at the U.S. Central Bank.

Fed Rate Cut Odds For September Climb By 56.1%

According to the CME FedWatch tool, traders are betting that the U.S. Federal Reserve will lower interest rates after September’s FOMC meeting. A look at the data reveals that the odds for a rate reduction to 400-425 bps stand at a staggering 56.1%.

On the flip side, the probability of the Fed keeping interest rates steady between the present levels of 425-450 bps is pegged at 40.4%. However, the odds of a Fed rate cut to 375-400 bps sit at a mere 1.5%.

The rising odds for an incoming Fed rate after September’s FOMC meeting follow mounting speculation over Jerome Powell’s future as Fed Chair. Whispers of his removal from the role have grown louder over the previous days, with the latest report alleging that Trump plans to fire Powell.

While Trump has denied the claims, Powell’s future still hangs in the balance. The Fed Chair is facing a barrage of calls to step down from the role over interest rate cuts, while FHFA Chairman William Pulte claims that Powell is considering resignation.

Pulte is urging Congress to investigate Powell over untrue statements made concerning the Fed’s $2.5 billion renovation of its headquarters. Powell’s term ends in May 2026, with a Supreme Court ruling that the Fed Chair cannot be removed except for “cause,” such as proven misconduct.

Federal Reserve To Keep Rates Steady In July

Despite the changing odds, the chances of a Fed rate cut in July are at an all-time low. According to data from the CME FedWatch tool, the probability of rate cuts is at a mere 2.6%. Conversely, traders are bracing for the Fed to keep interest rates steady, with the odds pegged at 97.4%.

The Fed is citing new inflationary risks from heightened Trump tariff wars, with the U.S. President issuing new trade letters to several countries. U.S. CPI data came in hot at 2.7% exceeding the 2.6% target amid rising inflation concerns. However, the U.S. PPI data came in cooler than expected, which makes a case for a rate cut.

However, the odds for a July Fed rate cut had already tumbled following the release of strong U.S. labor market data. With only 13 days till the next FOMC meeting, cryptocurrency enthusiasts are shifting their gaze to September amid rising rate cut odds.