Here’s the latest outlook on whether the Federal Reserve will reduce interest rates at its September 2025 meeting:
Market Expectations & Analyst Forecasts
-
Market sentiment strongly favors a rate cut:
A Reuters poll of economists finds 61% expect a 25 basis point cut in September, lowering the rate to 4.00–4.25%.Reuters
The CME Group’s FedWatch tool places the probability at around 94%, up significantly from a month earlier.InvestopediaReuters
Some outlets cite figures as high as 90–96%, signaling widespread market confidence.ForbesFortuneReuters
-
Financial institutions sharing the outlook:
Nomura forecasts a 25 bp cut in September, followed by additional reductions in December and March—but considers a larger 50 bp cut unlikely.Reuters
J.P. Morgan has shifted forward its rate-cut forecast to September and projects three more 25 bp cuts thereafter.Reuters
Fed Governor Michelle Bowman reiterates expectations for three cuts in 2025, implying September is likely among them.Fox Business
Key Risks & Complicating Factors
-
Persistence of inflation:
Strong Producer Price Index (PPI) data, showing a 0.9% monthly rise in July (the largest since 2022), has raised concerns among some analysts, pulling down odds slightly from near certainty to around 90%.AInvestReuters
Some policymakers and analysts urge caution, with several citing ongoing inflation pressures and tariff-related effects.AP NewsReuters
-
Internal Fed division:
While dissenters like Governor Bowman and Governor Waller support rate cuts, other Fed members remain cautious, highlighting inflation risks.AP NewsFox BusinessReuters
Fed Chair Powell's upcoming speech at the Jackson Hole symposium (August) is expected to be pivotal in signaling the Fed’s stance heading into September.MarketWatchThe Australian
Summary Table
| Factor | Details |
|---|---|
| Market Odds | Very high (~90–94%) likelihood of a 25 bp cut in September |
| Economist Consensus | ~61% expect a 25 bp cut |
| Major Banks | Nomura and J.P. Morgan both forecast cuts starting in September |
| Risks | Sticky inflation, mixed policy signals, and uncertain economic data |
Final Take
Yes, the Federal Reserve is widely expected to cut interest rates by 25 basis points at the September 2025 FOMC meeting. Market probabilities, economist forecasts, and major bank projections all align around this outcome. However, persistent inflation pressures and internal debates at the Fed mean there’s still some chance it could hold off, pending data and Chair Powell’s tone at Jackson Hole.
Let me know if you'd like insights into how this might affect mortgage rates, borrowing costs, or investment sectors.
Comments(6)