Investors Line Up as Fed’s September Rate Cut Nears Certainty

The probability of the Federal Reserve implementing a rate cut in September has surged to 99.4% according to the CME Group's "Fed Watch" tool, with the likelihood of maintaining current interest rates at only 0.6%. This marks a significant shift from the rate freeze that characterized 2025, where the federal funds rate was locked in a range of 4.25% to 4.50%[1]. Market expectations extend beyond the September meeting, with a cumulative probability of a 25 basis point rate cut in October standing at 44.5%, and the chance of a 50 basis point cut reaching 55.3%[1].

The anticipated cut is expected to create a ripple effect across financial markets, particularly in savings and borrowing sectors. Instruments such as certificates of deposit (CDs) and high-yield savings accounts may see reduced interest rates as a direct result of the policy shift. Homebuyers and borrowers are also anticipated to benefit, especially as mortgage rates have seen a steady decline throughout 2025. According to FreddieMac, the average 30-year mortgage rate dropped from 7.04% in January to 6.56% by the end of August, indicating an ongoing trend of moderation[2].

Notably, market dynamics suggest that mortgage rates could decline prior to the formal announcement of the rate cut. This is largely driven by the behavior of lenders who may proactively adjust rates in anticipation of the Fed’s decision. Historical data supports this pattern, as mortgage rates fell before a 50 basis point cut was made public last September. Experts predict a similar trend may occur ahead of the 25 basis point cut expected on September 17[2]. Furthermore, the 10-year Treasury yield also plays a critical role in shaping mortgage rates, and its downward trajectory may contribute to further rate reductions before the official announcement.

In the cryptocurrency market, the expectation of a rate cut has created a bullish outlook. According to Polymarket, a prediction platform, 83% of users are betting on a standard 25 basis point cut, while 4% are predicting a more aggressive 50 basis point reduction. Only 13% of users are wagering on a rate hold. These figures indicate that the market is largely pricing in a cut as the baseline expectation, with the potential for further easing depending on macroeconomic developments[3]. The move is viewed as a tailwind for crypto assets, particularly in light of the European Central Bank’s ongoing easing cycle.

As the market prepares for the anticipated shift in monetary policy, investors and borrowers are advised to remain agile. For homebuyers, refinancing opportunities may improve in the coming weeks, and maintaining a strong credit profile is recommended to capitalize on potential rate declines. Meanwhile, investors in both traditional and digital assets are closely monitoring the Fed’s decision, understanding that even small changes in policy could influence broader market trends. The convergence of these factors underscores the significance of the September 17 FOMC meeting in shaping the financial landscape moving forward.

Source:

[1] The probability of the Federal Reserve cutting interest rates (https://www.chaincatcher.com/en/article/2203430)

[2] Why mortgage rates may fall before the September Fed (https://www.cbsnews.com/news/why-mortgage-rates-may-fall-before-september-2025-fed-rate-cut/)

[3] For Crypto, a 25 Bps Rate Cut is Now the Baseline Expectation for September (https://cryptorank.io/news/feed/84b4a-crypto-expects-25-bps-september-fed-rate-cut)