T
he financial community is abuzz as the Federal Reserve’s September 16‑17 FOMC meeting approaches. Market data now points to an 83‑94 % probability of a 0.25 % cut, a sharp rise from the earlier 80 %+ estimate. While Chair Jerome Powell’s influence is significant, the decision rests with the FOMC as a whole.
**Key Economic Indicators**
- **Inflation**: July CPI rose 2.7 % YoY, still above the Fed’s 2 % target; core CPI sits at 3.1 %. The decline from 2022 highs suggests rate hikes are working, but inflation remains persistent.
- **Employment**: Unemployment edged up to 4.2 % in July, with non‑farm payroll growth slowing to 114,000 jobs. The labor market is cooling, a signal the Fed watches closely.
- **Growth**: Q2 2025 GDP grew 3.0 %. Forecasts project a slowdown to about 1.5 % for the rest of the year, hinting at a “soft landing” scenario.
These mixed signals—moderate inflation, a softening labor market, and slowing growth—create a backdrop where a rate cut appears prudent.
**Market Consensus and Probability Tools**
The CME FedWatch Tool and other market monitors consistently show odds above 90 % for a 25‑basis‑point cut. For example, as of mid‑August 2025:
- CME FedWatch: 82.9 % chance of a 25‑bp cut, 17.1 % for a 50‑bp cut.
- Bloomberg Analysts: 90 %+ probability of a cut.
- Investing.com Fed Monitor: 91.8 % for a 25‑bp cut.
These figures reflect traders’ expectations based on futures contracts and are updated daily as new data arrives.
**Powell’s Messaging**
Powell has reiterated the Fed’s “data‑dependent” stance. In the July 30, 2025 statement, he noted the current 4.25‑4.50 % range while emphasizing the need to keep inflation at 2 % and support maximum employment. He signaled readiness to adjust policy if new risks emerge. His upcoming Jackson Hole appearance will be closely watched for further clues.
**Implications of a Cut**
- **Consumers**: Lower borrowing costs could reduce mortgage, auto, and credit‑card payments, easing household budgets.
- **Businesses**: Cheaper capital can spur investment, hiring, and expansion.
- **Investors**: Stocks may rally as lower rates make equities more attractive; bonds could lose value if fixed yields fall below new issuances; the dollar may weaken.
A no‑cut scenario would suggest the Fed remains concerned about inflation or a stronger economy, potentially tempering equity enthusiasm.
**Risks and Uncertainties**
- **Sticky Inflation**: New tariffs or supply shocks could raise prices, prompting the Fed to delay a cut.
- **Unexpected Growth**: Stronger‑than‑expected data might lead to a rate hold or even a hike.
- **Market Sentiment**: Over‑optimism could shift probabilities if economic fundamentals diverge from expectations.
**Bottom Line**
Current data and market sentiment place the probability of a September 2025 rate cut between 85‑95 %. Inflation is easing, employment is softening, and growth is slowing—conditions that favor easing. However, the Fed’s commitment to data dependency means the decision remains fluid until the FOMC convenes.
**Strategic Takeaway**
Investors should monitor Powell’s remarks, upcoming economic releases, and the FOMC meeting outcome. Adjust portfolios accordingly: consider mortgage refinancing, evaluate business borrowing plans, and reassess bond holdings in light of potential rate changes.
**Real‑Estate Note**
Norada Real Estate offers cash‑flowing properties in stable markets, designed to mitigate volatility from rate swings. Contact a Norada investment counselor at (800) 611‑3060 for tailored advice.
