Markets Price in 100% Chance of 25-Basis-Point Fed Rate Cut in September 2025

Generated by AI AgentCoin World
Thursday, Aug 14, 2025 8:32 am ET1min read
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Aime RobotAime Summary

- Markets price near-certainty of 25-basis-point Fed rate cut at September 2025 meeting, pushing dollar lower as OIS rates hit 4.08%.

- St. Louis Fed's Bullard supports cautious 25-basis-point easing but rejects aggressive cuts to 1.5%, emphasizing data-driven decisions.

- Mixed inflation trends (cooled goods vs. rising core services) and tightening labor market create uncertainty, tempering aggressive easing expectations.

- Bitcoin hits record highs amid dollar weakness, yet Fed remains silent on official policy path despite market pricing in 100% cut probability.

Traders and investors are increasingly pricing in the likelihood of a 25-basis-point rate cut by the Federal Reserve at its upcoming September 2025 meeting. According to overnight indexed swap (OIS) contracts and market indicators, the probability of such a move stands at nearly 100% [2]. This anticipation has contributed to downward pressure on the U.S. dollar, with OIS rates tied to the meeting dropping to an intraday low near 4.08% [2].

St. Louis Federal Reserve President James Bullard has weighed in on the debate, suggesting that the Fed could begin its easing cycle with a modest 25-basis-point cut. However, he has not called for an aggressive rate-cutting path that would bring the federal funds rate down to 1.5% as some analysts or market participants may be expecting. Instead, Bullard emphasized that any easing should be guided by evolving economic conditions, rather than pre-determined projections [3].

The discussion around rate cuts has been shaped by recent developments in the labor market and inflation. The labor market has shown signs of tightening, which has led some to forecast a 25-basis-point cut in September [3]. However, the inflation picture remains mixed. While the goods sector has cooled, core services inflation has worsened, reaching its highest level in six months [4]. This divergence has introduced uncertainty into the Fed’s decision-making calculus and may temper expectations for a more aggressive easing cycle.

Bitcoin has responded positively to the growing narrative of Fed easing and a weaker dollar, reaching record highs amid the broader shift in market sentiment. Yet, despite the market’s strong pricing in of a rate cut, the Federal Reserve has not yet issued an official signal about its September policy path. Bullard’s measured comments reflect a cautious stance, reinforcing that future rate cuts will depend on how the economy and inflation evolve [3].

Market participants remain attentive to any formal guidance from the Fed ahead of the meeting, particularly as conflicting signals from labor and inflation data complicate the outlook. For now, the consensus suggests the Fed is leaning toward a modest easing move in September. However, any further reductions will likely be gradual and data-driven, with no indication of a move toward a 1.5% federal funds rate in the near term [4].

Source:

[1] Traders see 99% chance of September rate cut. ewfpro.com.

[2] Markets Price in Certain Fed Rate Cut in September. FastBull.

[3] Latest Technical Analysis on Currencies / Forex. MarketScreener.

[4] Fed's Nightmare: CPI Inflation in Core Services Worst in 6 Months. Wolf.