FOMC Meeting: Why a September Rate Cut Looks Likely – And What Could Stop It

All eyes are on the Federal Reserve as the FOMC prepares to meet on September 16–17, 2025. With the federal funds rate currently set at 4.25%–4.50%, markets are pricing in a strong chance that policymakers will pivot toward easing.

The discussion is shifting from inflation control to concerns about a cooling labor market. Fed Chair Jerome Powell has already warned of “downside risks” to jobs, adding momentum to speculation that rate cuts are back on the table. Still, nothing is certain in the world of central banking, and upcoming economic data could prove decisive.

Why a September Rate Cut Looks Likely

The case for a September cut has gained traction over the summer. At Jackson Hole, Powell hinted that the Fed may need to step in as employment data weakens. 

• July’s payrolls rose just +73k, while unemployment ticked up to 4.2%. Inflation pressures have also eased, with headline CPI at 2.7% and PCE at 2.6%. The labor market has slowed consistently:

1. NFP: +19k (May), +14k (June), +73k (July)
2. ADP: +104k in July
3. Job openings: 7.8M → 7.4M
4. Jobless claims: ~230k weekly; continuing claims ~1.95M

• Wage growth is holding at +0.3% month-over-month (m/m) and +3.9% year-over-year (y/y), but not fast enough to offset the cooling hiring market. On prices, inflation looks softer overall, though core PCE at 2.9% in July raised some concerns.

• Elsewhere, the U.S. economy shows signs of fatigue. Manufacturing remains in contraction (48.5 → 48), while services are flat around 50. In contrast, July retail sales surprised with a 0.7% gain.

• Against this backdrop, CME FedWatch data shows 80%–91% odds of a 25 bps cut, with Fed Governor Christopher Waller openly backing the move.

What Could Stop It

Despite market conviction, some risks remain. Analysts still assign 20%–30% odds that the Fed will hold steady, with firms like Morgan Stanley even suggesting the chances are closer to 50-50.

Two upcoming data points could change the narrative:

• August jobs report (Sept. 5): A strong print above 150k payrolls with lower unemployment could weaken the case for cuts.

• August CPI (Sept. 11): If inflation climbs above 3.2%, hawks may argue the Fed should wait.

• Other potential spoilers include unexpected tariffs, GDP revisions, or signs of resilience in consumer spending.

How a Rate Cut Could Influence Crypto

• Markets are already reacting. After Powell’s Jackson Hole comments, BTC briefly pushed above $114,700 and ETH touched $4,600. Traders see lower rates as a liquidity boost that favors risk assets.

• If cuts materialize in September, analysts believe BTC could climb toward $125,000 by year-end, while ETH may benefit more strongly, thanks to ETF inflows and altcoin rotation.

• Ethereum could also outperform in the ETH/BTC ratio. This signals a potential for an “altcoin season” if liquidity drives capital beyond Bitcoin. Still, recession fears tied to aggressive cuts could trigger short-term dips, with ETH likely more volatile due to its higher beta.

Crypto Market Ripple Effects

• Historically, looser monetary policy has supported crypto markets by fueling a “risk-on” environment. Altcoins, in particular, stand to benefit as traders seek higher returns in a more liquid market.

• Coinbase and other crypto stocks have already moved higher on expectations of easing. But volatility remains a risk. Cuts framed as a response to economic weakness could initially spark sell-offs before longer-term bullish momentum takes hold.

Social and Market Sentiment

On X, traders are leaning bullish but with caution. Many point to 85%–90% cut odds, while reminding followers that data can quickly shift. Additionally, many highlight ETH’s fresh all-time highs and potential Q4 upside, despite September’s historically tough seasonality.

Meanwhile, many are very cautious because fading cut hopes led to recent dumps, with $100 million liquidated in an hour. However, altcoin enthusiasts are optimistic, but some stress data like today’s PCE report will decide the fate. Overall, it’s “bullish with hedges”—excitement for a liquidity flood, but braced for volatility.

• Henry warned that cut odds slipped from ~100% to ~85% after PPI data, spooking risk markets.

• Walter Bloomberg cited prediction markets pegging the chance of a cut as low as 68%, prompting some traders to hedge.

• Midas sees ~75% odds but expects near-term volatility followed by longer-term gains.

• That Martini Guy floated the possibility of a surprise 50 bps cut, calling it extremely bullish for crypto.

Overall, sentiment is “bullish with hedges” — excitement for a liquidity wave tempered by the risk of a data surprise.

Here’s How Traders are Gauging this Market Sentiment

With just weeks to go before the FOMC meeting, markets are heavily tilted toward a September cut, but probabilities have slipped in recent days. Crypto traders are preparing for both outcomes: a cut that could fuel rallies in BTC and ETH, or a hold that could trigger sharp pullbacks.

Either way, September’s meeting is shaping up to be one of the most consequential Fed decisions in recent memory, not just for Wall Street but for the crypto world as well.

Disclaimer: This article is based on publicly available economic data and commentary from market analysts. While CoinEdition has synthesized and contextualized these views, readers should treat the content as informational rather than financial advice.