- There is a 9.6% chance the Fed could pull the trigger on a 50 bps cut, a shift prompted by the unexpectedly weak August job data.
- Job growth slowed notably in August, with only 22,000 positions added against a forecast of 75,000.
- Many, including the crypto analyst Ash Crypto, believe that rate cuts in September are confirmed.
The CME FedWatch Tool now signals a 90.4% probability of a 25 bps (basis points) rate cut in September. Additionally, there is a 9.6% chance the Fed could pull the trigger on a 50 bps cut, a shift prompted by the unexpectedly weak August job data.
Job growth slowed notably last month, with only 22,000 positions added against a forecast of 75,000. Furthermore, June’s figures were revised downward to a net loss, indicating a softening labor market. The unemployment rate climbed to 4.3%, which is a high not seen since October 2021.
As a result, Bank of America updated its prediction to expect two rate cuts in 2025, one in September and another in December. Many, including the crypto analyst Ash Crypto, believe that rate cuts in September are confirmed.
In August, market voices like Treasury Secretary Scott Bessent have called for aggressive cuts, possibly up to 50 bps, but analysts caution that such a move might appear panicky if inflation isn’t firmly under control. The current consensus is that the 50 bps cut is unlikely, but the 25 bps one might very well happen soon.
Related: For Crypto, a 25 Bps Rate Cut is Now the Baseline Expectation for September
The report also showed that the S&P 500 is hitting record highs, driven by dovish Fed expectations and economic data. On the other hand, there was a sharp decline in Treasury yields, which likely points to the market’s increasing conviction that interest rate cuts are imminent.
Fed signals versus market expectations
With the jobs report out and a probable rate cut, investors are now turning their attention to how a rate cut will shape broader markets. Declines in interest rates typically stimulate stock market performance, simultaneously weakening the US dollar and bolstering the appeal of gold and higher-risk investments such as cryptocurrencies.
However, analysts also warn that if the Fed cuts too aggressively while inflation remains sticky, it could backfire, triggering volatility. Fed officials are expected to give clearer guidance in the coming weeks, but for now, traders and crypto enthusiasts are positioning their assets around the likelihood of September’s cut, with eyes set on December for potential follow-up easing.
Related: FOMC Meeting: Why a September Rate Cut Looks Likely – And What Could Stop It
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