The trader worked on the New York Stock Exchange on August 29, 2025.
NYSE
Traders will be able to keep that option open next week and cut its main interest rate by half percentage points, but most people on Wall Street think it’s pretty high to do so.
In the most likely scenario priced on the market, on September 17th, the Fed will reduce its one-night funding rate by 25 basis points (0.25 percentage points). The odds of a quarter point cut were about 88% on Monday afternoon, according to CME Group’s FedWatch tool, which measures the Fed odds under a 30-day Fed fund futures contract.
But this left a remote opportunity for the central bank’s Federal Open Market Committee to enact a half-point cut, as was held at its September 2024 meeting. The chances were 12% as traders ignored the possibility that a committee would be placed.
Market sentiment shifted further after Friday’s employment report showed non-farm salaries expanded at just 22,000 in August and unemployment rates rose to 4.3%, nearly four years.
“The Soft August Employment Report will help promote the committee’s consensus that rate cuts will not only resume this month, but that there will likely be further cuts in the coming months,” Citigroup economist Andrew Hollenhorst said in a memo after the payroll release.
Hollenhorst believes there is some support for the FOMC for the bigger move, but “the majority of the committee does not believe it will support a 50 (base point) cut.” Those who support the bigger move probably need Governors Michelle Bowman and Christopher Waller and Stephen Milan to check him out before the Senate confirms him.
Citi holds a slightly less-continued view as the FOMC cuts each of the next five meetings, and authorities look into current inflation trends and focus on weaknesses in the labour market. The call is based on Fed officials who continue to worry about inflation but are more focused on work.
“The August Employment Report solidifies the case in which the Fed will make a series of insurance cuts at upcoming meetings,” wrote Nomura economist David Seiff. “As the risk of inflation increases, authorities expect to see clear evidence of labor market stress or abrupt tightening of market financial situations before achieving more aggressive easing.”
Current market expectations are that the Fed will cut next week, skip October and drop again in December.
In the days when FOMC chairs began newspaper meetings after each meeting (started in 2019 along with current Jerome Powell), meetings were rarely skipped during periods when the Fed was adjusting fees.
But Apollo economist Torten Sloek said policymakers are now in a ticklish place where they have a double goal of central banks’ stable prices and full employment in the conflict, beyond pictures of inflation and soft work.
First CPI
Fed officials will obtain inflation data on producers and consumer prices later this week. This will release the last major data before the meeting. Economists surveyed by Dow Jones expect the core to remain at 3.1%, but expect inflation for all items to rise to 2.9%. A higher than expected CPI could solidify your quarterpoint move.
“In the worst case, if inflation is surprised upside down, it really makes it difficult and we can discuss this feeling next week,” Sloak told CNBC on Monday. “So how does the Fed make policy when one side of the double mission says it should be cut off and the other side says it should be hiking?”
Slok said he still hopes that even stubborn inflation is moving towards mitigation in the Fed.
“I think they’ll start talking more about inflation expectations and start putting a little weight on current inflation and future inflation,” he said.
