Traders see 99% chance of September rate cut

Investing.com -- Traders are now pricing in a 99% probability of a 25-bps interest rate cut at the September 17, 2025, Federal Reserve meeting, according to Investing.com’s Fed Rate Monitor Tool. This is up from yesterday’s probability of 91.4%.

Further, traders now see a 1.4% probability of a 50-basis point cut at the upcoming meeting. Previously, there was zero chance of such an outcome.

The current federal funds rate is at 4-1/4 to 4-1/2 percent.

President Donald Trump and his administration have been pressing Fed Chair Jerome Powell for a cut for months, saying the high rates are costing the government billions extra in interest costs.

Yesterday, Treasury Secretary Scott Bessent said on Fox News that a 50-bps cut is appropriate. He reiterated that view and went even further today by suggesting that the federal funds rate should be 1.5% lower. “I think we could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September,” Bessent said on Bloomberg. “If you look at any model, it suggests that we should probably be 150, 175 basis points lower.”

Next week, the market will hear from Powell at the Jackson Hole Economic Symposium. Powell has been resistant to cutting rates due to Trump’s tariffs, creating a rift on the Federal Reserve board. In July, two Fed governors dissented in the decision to maintain the fed fund rates – instead wanting a 25-bps cut. Next week, it is now widely expected that Powell will hint at a September rate cut.

Powell’s refusal to cut rates will likely cost him his job. The administration, led by Bessent, is now actively looking for a new Fed Chair. Today, Trump said he has narrowed it down to “three to four” for the job. While Trump did not name names, markets see the leading candidates as Christopher Waller, Kevin Warsh, Kevin Hassett, and James Bullard. A dark horse candidate is Stephen Miran. Powell’s term is up in May 2026.