Markets Are Pricing in Nearly 91% Odds of Fed Rate Cut by September

WhaleMinion · 2025-12-26T21:23:31+00:00

Market expectations indicate a strong likelihood of a 25 basis point rate cut by the Fed in September, while October shows divided opinions between a standard cut and a more aggressive reduction, suggesting continued easing in monetary policy.

WhaleMinion

2025-12-26 21:23:31

Abstract generation in progress

According to CME FedWatch data released on August 11, the interest rate market is heavily favoring a dovish Fed pivot in the coming months. The cumulative probability picture reveals a significant shift in monetary policy expectations.

September’s Near-Certain Cut

Market participants are assigning a 90.7% likelihood to a 25 basis point rate reduction in September, with only a 9.3% chance that the Federal Reserve will maintain its current stance. This overwhelming consensus signals strong market conviction about an imminent policy shift.

October’s Diverging Paths

The outlook becomes more fragmented looking ahead to October. The cumulative probability calculations show a 4.5% odds of the Fed keeping rates unchanged, while a single 25bp cut carries 48.9% odds. However, the cumulative probability of a more aggressive 50bp cut stands at 46.5%, suggesting markets are split between a moderate half-point reduction and the standard quarter-point move.

What This Means

The data reflects growing confidence that rate cuts are imminent, with September representing the likely starting point. The October scenarios paint a picture of policy continuity—whether through consecutive 25bp cuts or a larger 50bp move—indicating the Fed is expected to continue easing regardless of which path it takes.

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