Markets Price In 96% Chance Of Fed September Rate Cut Amid Cooling CPI Data

Investors are overwhelmingly pricing in a 96% chance of a Federal Reserve rate cut in September following the latest inflation data, which showed a cooler-than-expected July CPI reading [1]. This has reignited expectations for a reduction, with many now looking beyond a single 25-basis-point cut and considering the possibility of a 50-basis-point cut [1].

The pressure on Fed Chair Jerome Powell and the FOMC comes not just from the data, but from high-profile figures, including Treasury Secretary Scott Bessent, who argued on Fox News that the recent inflation numbers justify a larger cut to offset missed opportunities in June and July [1]. Bessent emphasized that earlier payroll data revisions—particularly the sharp downward revision of May and June job gains—highlighted a weaker labor market than initially reported, reinforcing the case for a more aggressive rate move [1].

President Trump also joined the chorus, reiterating his belief that the Fed has been too slow to normalize monetary policy and that tariffs have not driven inflation [1]. This aligns with his nominee Stephen Miran, who is seen by markets as a dovish voice likely to support further easing [1].

Despite these calls for a larger cut, analysts remain divided. Tim Graf from State Street Global told Reuters that while investors are hedging toward the possibility of a 50-basis-point cut, they are not yet pricing it in as a certainty [1]. Deutsche Bank’s Jim Reid similarly cautioned against viewing a September cut as a foregone conclusion, noting that the key data for the Fed will come in the form of upcoming labor market reports [1].

UBS Global Wealth Management’s Mark Haefele, however, remains bullish on the likelihood of a 100-basis-point rate cut by June 2026, starting with September [1]. He sees the current economic slowdown and controlled inflation as conditions that support ongoing easing.

Yet, not all voices are in agreement. JPMorgan’s Elyse Ausenbaugh and Blue Chip Daily Trend Report’s Larry Tentarelli both argue that the 3.1% core inflation rate and mixed labor market signals could give the Fed pause [1]. They note that the Fed’s policy decisions are data-driven and that the September meeting will likely be influenced more by the labor market data released in September than by the July inflation report alone [1].

Bill Adams of Comerica Bank echoed this sentiment, highlighting that the source of inflation—sticky service prices rather than goods impacted by tariffs—could lead the Fed to delay action [1].

The market is thus caught between high expectations and lingering uncertainties. While a September cut appears increasingly likely, the size of the cut and its timing remain under close watch, with key data releases over the next few weeks likely to shape the Fed’s final decision [1].

Source: [1] Markets have convinced themselves they’ll get a September interest rate cut—now they’re eyeing a double reduction (https://fortune.com/2025/08/13/markets-september-rate-cut-bessent-50-bps-call/)