JPMorgan Forecasts September Fed Rate Cut Amid Rising Dovish Signals

Traders are increasingly pricing in the likelihood of a U.S. Federal Reserve rate cut at its September meeting, with the probability now standing at 89.2% according to CME Group's FedWatch tool. This marks a significant increase from 37.7% just one week earlier, reflecting a growing consensus that the Fed may be poised to ease monetary policy [1]. Some analysts have even estimated the chance of a cut to be as high as 93% [3], reinforcing the expectation of an earlier-than-anticipated shift in policy.

JPMorgan has adjusted its 2025 rate-cut forecast to include an earlier reduction in September, followed by three additional 25-basis-point cuts before a potential policy pause [4]. The bank had previously projected the first cut to occur in December. This change is attributed to signs of weakness in the labor market and uncertainty around recent developments within the Fed's leadership structure [5].

Fed Governor Michelle Bowman has also stressed the importance of a faster response to a perceived weakening in the jobs market [6]. Meanwhile, President Donald Trump’s nomination of Stephen Miran to a temporary seat on the Federal Reserve’s Board of Governors has introduced further uncertainty into the central bank’s decision-making process. Miran, currently chair of the Council of Economic Advisers, is expected to adopt a more dovish stance on the rate-setting committee [7].

JPMorgan analysts suggest that the September decision could be influenced by the August jobs report, with an unemployment rate of 4.4% or higher potentially justifying a larger-than-expected rate cut [8]. Conversely, a lower unemployment figure may provoke resistance from policymakers focused on inflationary risks [9].

The market has already begun to react, with the U.S. dollar under pressure and traders pricing in up to 58 basis points of rate cuts by year-end [10]. The possibility of internal dissent within the Fed is also rising, with some analysts suggesting Miran’s presence could lead to three dissenting votes at the September meeting [11]. BofA Global Research anticipates at least one dissent in September if the expected rate cut is not delivered [12].

JPMorgan has also positioned Fed Governor Christopher Waller as a potential successor to Chair Jerome Powell, indicating that his appointment would likely be well-received by financial markets due to his clear policy stance and market-friendly approach [13]. Analysts at Barclays concur, noting that Waller’s leadership could provide greater clarity in the Fed’s data-driven decision-making process [14].

As the September meeting approaches, the central bank faces mounting pressure from both financial markets and political forces to ease monetary policy. While the Fed has historically emphasized a data-dependent approach, the convergence of weak labor data, dovish policy signals, and internal political dynamics is increasingly shaping expectations for an earlier rate cut. With the market largely pricing in an aggressive shift, the stage is set for one of the most closely watched Fed decisions in recent years.

Source:

[1] https://nypost.com/2025/08/08/business/jpmorgan-predicts-fed-will-cut-rates-in-september/

[2] https://www.mitrade.com/insights/news/live-news/article-3-1025173-20250808

[3] https://www.ainvest.com/news/markets-price-93-chances-fed-rate-cut-september-weak-jobs-data-2508/

[4] https://www.ainvest.com/news/jpmorgan-forecasts-fed-rate-cuts-2025-starting-september-reduction-2508/

[5] https://www.marketscreener.com/news/j-p-morgan-sees-fed-cutting-rates-at-each-of-its-next-four-meetings-ce7c5eddda8af222

[6] https://www.morningstar.com/news/marketwatch/2025080991/a-voice-breaking-from-the-fed-ranks-just-heightened-her-push-for-cutting-interest-rates-fast

[10] https://www.reuters.com/world/middle-east/dollar-heads-weekly-loss-dovish-fed-expectations-2025-08-08/