JPMorgan Pushes 0.5% Fed Rate Cut as Traders Price In 96% Chance

JPMorgan's chief market strategist, David Zervos, has reiterated his call for a 0.5 percentage point rate cut by the Federal Reserve, arguing that current monetary policy is overly restrictive amid rising inflation concerns. Zervos emphasized that the central bank should not overreact to recent Producer Price Index (PPI) data and should instead focus on preventing a slowdown in the labor market. His recommendation aligns with broader market expectations, with nearly 96% of traders pricing in a rate cut in the upcoming Federal Open Market Committee (FOMC) meeting [4]. However, the magnitude of the cut remains debated, with some analysts cautioning that a larger move could be perceived as panic-driven rather than a measured policy response [9].

Zervos’ advocacy for a rate cut has drawn attention as the cryptocurrency market reacts to shifting macroeconomic signals. Bitcoin reached a new all-time high shortly after the release of the PPI data, signaling a strong sensitivity to potential shifts in monetary policy. This mirrors historical patterns where monetary easing has previously boosted crypto markets [4]. While Bitcoin’s price dipped 3.73% in the past 24 hours, it recorded gains of 0.70% and 12.56% over the past week and two weeks, respectively, according to CoinMarketCap [4]. Analysts from the Coincu research team noted that continued attention to Fed policy decisions could further influence cryptocurrency price movements, though regulatory uncertainties continue to shape institutional investment strategies [4].

The push for a rate cut is supported by recent economic data showing core inflation rising to 3.1%, alongside inflationary pressures from tariffs and supply-side constraints. Treasury Secretary Scott Bessent has also weighed in, suggesting the Fed should remain open to a significant rate reduction to adjust the benchmark policy rate from its current 4.25% range [1]. This aligns with a growing dovish tone among policymakers and market participants who believe tighter monetary conditions may no longer be necessary given the evolving inflation landscape [7].

Despite the strong market anticipation for a rate cut, JPMorgan’s Elyse Ausenbaugh has highlighted the possibility that the Fed might hold off in September, noting that the central bank has yet to provide a clear signal of its next move [8]. This uncertainty has led to mixed market reactions. Initially, Treasuries saw gains as traders priced in the cut, but subsequent hotter-than-expected PPI data led to a pullback in rate-cut expectations [6]. Investors remain in a holding pattern, with some analysts forecasting continued economic expansion and a potential surge in the S&P 500 to 7,500 by early next year [5].

The debate over the appropriate path for monetary policy underscores the Fed’s challenge in balancing inflation control with economic stability. As the central bank prepares for its next meeting, market participants are closely watching for signals on whether the Fed will opt for a modest 25-basis-point cut or a more aggressive 50-basis-point reduction. The outcome will have significant implications for bond yields, equity markets, and overall investor sentiment in the coming months [3].

[1] JPMorgan Strategist Calls for New Neutral Fed Rate Amid ... (https://www.ainvest.com/news/jpmorgan-strategist-calls-neutral-fed-rate-tariff-impact-2508/)

[3] Scott Bessent questions whether Powell should cut rates ... (https://fortune.com/2025/08/13/markets-september-rate-cut-bessent-50-bps-call/)

[4] Markets have convinced themselves they'll get a September ... (https://finance.yahoo.com/news/markets-convinced-themselves-ll-september-103831537.html)

[5] There's a good reason stocks continue to hit all-time highs ... (https://www.msn.com/en-us/money/topstocks/there-s-a-good-reason-stocks-continue-to-hit-all-time-highs-most-companies-are-beating-expectations-jpmorgan-says/ar-AA1Krzgy)

[6] US Treasuries Fall as Traders Pare Fed Rate-Cut Bets ... (https://www.bloomberg.com/news/articles/2025-08-14/us-treasuries-fall-as-traders-pare-fed-rate-cut-bets-after-ppi)

[7] Hot wholesale prices data puts wrinkle in Fed's rate-cut ... (https://www.aol.com/fed-debate-september-rate-cut-134622796.html)

[8] Investors Can't Wait for the Fed's Imminent Rate Cut (https://www.inc.com/phil-rosen/economic-stock-market-outlook-cpi-inflation-fed-rate-cuts-investors/91226686)

[9] September rate cut odds, Goldman's response to Trump ... (https://www.msn.com/en-us/money/markets/september-rate-cut-odds-goldman-s-response-to-trump-and-more-in-morning-squawk/ar-AA1KwbUD?ocid=finance-verthp-feeds)