Market Pricing in Aggressive Fed Action as September is Set for Major Rate Decision

Based on CME FedWatch data from August 11, financial markets are heavily betting on monetary policy changes in the coming months. The probability landscape shows a compelling narrative: there’s a 90.7% chance that the Federal Reserve will deliver a 25 basis point rate cut in September, with only a 9.3% probability assigned to rates remaining unchanged.

Looking further ahead, the October outlook presents a more nuanced picture. Market participants are pricing in multiple scenarios: a 4.5% probability of unchanged rates, alongside a 48.9% cumulative probability for a 25 basis point cut and a 46.5% cumulative probability for a 50 basis point cut.

These market expectations, as tracked through CME’s FedWatch tool, suggest that traders are increasingly confident in near-term rate reductions. September is shaping up to be a pivotal moment for monetary policy direction, with the overwhelming consensus pointing toward easing. The divergence between September’s near-certain rate cut scenario and October’s more mixed expectations indicates market uncertainty about the Fed’s subsequent moves, though the cumulative probabilities show rate cuts across both months remain the dominant outcome traders are positioning for.