Markets Price 93% Chances of Fed Rate Cut in September Amid Weak Jobs Data

Markets have increasingly priced in the likelihood of a Federal Reserve rate cut in September, driven by a combination of weak economic data and shifting investor sentiment. A disappointing July payrolls report, paired with significant downward revisions to earlier months’ employment figures, has reinforced expectations that the Fed may ease monetary policy when it meets September 16–17 [1]. This shift has been reflected in futures markets, where the CME Group’s FedWatch tool indicates a near 93% probability of a 25 basis point reduction, up from 48% just a week earlier [2]. Traders now see an almost certain second cut before year-end and roughly a 50-50 chance for a third [2].

The anticipation of a Fed move has rippled across asset classes. In Treasury markets, December U.S. Treasury note futures have shown bullish momentum, with prices forming a technical pattern that suggests further upside potential. Fundamentally, the weak labor data has bolstered the case for a rate cut, which would support demand for U.S. government debt as a safe-haven asset [3]. Meanwhile, equity markets have historically responded positively to Fed easing, with the S&P 500 tending to rally in such environments. Investors are watching closely for a potential repeat of past performance patterns [4].

The dollar has also been under pressure amid heightened rate-cut speculation. Traders are pricing in a 93% chance of a September reduction, with expectations of additional cuts later in the year. This has contributed to a weekly decline in the U.S. currency, particularly against gold, which has gained traction as markets price in a dovish Fed stance. Gold prices remain elevated on expectations of lower interest rates, which typically reduce the opportunity cost of holding non-yielding assets [5].

Analysts remain divided on the timing and magnitude of any potential Fed action. While the market consensus leans toward a September cut, the central bank has yet to act in 2025. Inflation remains a critical consideration, and any deviation from expected trends could delay or alter the Fed’s decision. Nonetheless, the current pricing reflects a high degree of confidence in a rate cut, signaling that investors are positioning for an easing cycle [6].

The first potential roadblock comes as the Bureau of Labor Statistics prepares to release July’s consumer price index (CPI) data. Forecasts point to a 0.3% gain for headline CPI and 0.2% for core CPI [2]. The report follows the recent firing of the BLS commissioner by President Donald Trump, adding to the uncertainty surrounding the data. Then on Thursday comes the July producer price index, a measure of wholesale costs that could show pressure from Trump’s tariffs [2]. A hawkish print would likely be a reality check for markets and keep the rally locked into a narrow group of big growth names, according to Barclays’ Emmanuel Cau. A soft CPI print, however, would likely lock in cut expectations, push stocks higher, and cap the dollar’s short-term upside [2].

JPMorgan’s chief U.S. economist, Michael Feroli, is leaning toward a series of rate cuts, suggesting the Fed could lower rates at all three remaining meetings through the end of 2025 “before pausing indefinitely.” He noted that while it is not unprecedented for the Fed to ease when stocks are at or near all-time highs, it is rarer when inflation is above target and inflecting higher [2]. The bank had previously forecast its first cut in December, but now sees a 25-basis-point reduction in September, followed by three more quarter-point moves before stopping [2].

Another key variable is the political maneuvering around the Fed’s board. President Trump has nominated Stephen Miran, chair of the Council of Economic Advisers, to temporarily replace outgoing Fed Governor Adriana Kugler. Miran’s confirmation before the September meeting isn’t guaranteed, but analysts believe his presence could sharpen divisions on the rate-setting committee. The nomination follows Trump’s repeated but unsuccessful pushes to get the Fed to cut rates more aggressively [2]. Installing Miran, even briefly, could give Trump a more direct line into the central bank’s decision-making.

For now, investors are left with two big variables: the inflation numbers due next week and the political maneuvering around the Fed’s board. Both will hit before the September 16–17 meeting, and both could decide whether the market’s latest rescue fantasy actually happens [2].

Source:

[1] https://www.msn.com/en-us/money/markets/markets-are-betting-the-federal-reserve-will-cut-rates-in-september/ar-AA1KafPn?ocid=finance-verthp-feeds

[2] https://www.cnbc.com/2025/08/08/markets-are-betting-on-the-fed-to-save-the-day-that-could-be-a-mistake-.html

[3] https://www.barchart.com/story/news/34002785/as-the-fed-preps-to-cut-rates-consider-buying-the-t-note-here

[4] https://m.economictimes.com/news/international/us/us-stock-market-reaction-to-fed-rate-cuts-fed-rate-cuts-are-coming-heres-how-much-the-stock-market-could-boom-based-on-history/articleshow/123173607.cms

[5] https://www.thinkmarkets.com/uk/market-news/gold-eyes-new-record-highs-as-fed-turns-dovish/