Persistent Inflation Issue: Federal Reserve Maintains Rates Constant for the Fifth Consecutive Occasion
Federal Reserve Likely to Lower Interest Rates in September 2025, According to Market Consensus
The Federal Reserve kept interest rates steady for the fifth consecutive time on Wednesday, but the market is betting on a change in the near future. According to several major financial institutions, the Fed is expected to lower interest rates by 25 basis points in September 2025.
Chairman Jerome Powell stated that the overall effects of higher tariffs on economic activity and inflation remain to be seen. However, he emphasized the importance of keeping long-term inflation expectations anchored and preventing a one-time increase in the price level from becoming an ongoing inflation problem.
The probability of a rate cut in September 2025 is currently around 90%, according to the CME FedWatch tool. This substantial increase in probability follows recent weak jobs data and signs of slowing inflation.
Goldman Sachs predicts the Fed will start cutting rates in September 2025, with a possible series of three 25-basis-point cuts later in the year. They cite slowing inflation and a cooling labor market as key reasons for their prediction.
Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, shares this outlook. Although she did not provide a specific prediction for the rate cut, she expects the data to tell the Fed to deliver a cut later this year. She believes that unemployment will rise modestly and services inflation will continue to cool.
However, the Fed emphasizes maintaining flexibility based on upcoming data releases. Two members of the Board of Governors dissented, suggesting a lowering of interest rates by one-quarter of a percentage point.
Despite the market consensus, Chairman Powell stated that the Fed sees their current policy stance as appropriate to guard against inflation risks. The interest rates currently stand between 4.25% and 4.5%, and inflation is currently at 2.7%. The U.S. economy grew more than expected, according to federal data.
In the meantime, Ausenbaugh thinks it is a strong possibility that the Fed will cut rates in September. She did mention that a lot could change between now and the FOMC's next decision point in September.
The Federal Reserve held interest rates steady at the Federal Open Market Committee meeting, but the market is eagerly awaiting the next move. With the strong consensus and the current economic signals, it seems that a rate cut in September 2025 is very likely.
Businesses are closely watching the Federal Reserve's decision on interest rates, with many predicting a rate cut in September 2025. Goldman Sachs and J.P. Morgan Wealth Management have suggested a series of potential rate cuts later in the year due to slowing inflation and a cooling labor market. However, Chairman Powell stressed that the Fed sees their current policy stance as appropriate to guard against inflation risks. Despite the market consensus, the Fed maintains flexibility based on upcoming data releases, making the final decision subject to change. The success of various business strategies may hinge on the news of interest rate changes in the near future, as investment and finance industries closely follow the news on the Fed's rate decisions.
