Fed Rate Cut Odds Surge Amid Powell Uncertainty

September Fed Rate Cut Odds Increase Amidst Uncertainty Over Powell's Future

The likelihood of the U.S. Federal Reserve cutting interest rates in September has significantly increased, fueled by uncertainty surrounding Fed Chair Jerome Powell. This comes amid reports of potential actions affecting his tenure, including speculation about his possible dismissal and considerations of resignation.

Market Indicators Point to Potential Rate Adjustments

According to the CME FedWatch tool, market participants are actively pricing in a rate cut following the September FOMC meeting. The data indicates a 56.1% probability of a rate reduction to the 400-425 bps range.

• 56.1% chance of rate cut to 400-425 bps.
• 40.4% probability of maintaining current rates at 425-450 bps.
• Only a 1.5% chance of a more aggressive cut to 375-400 bps.

Speculation about Powell's future is intensifying, influenced by reports of potential dismissal and investigations into the Fed’s renovation projects. While denials have surfaced, the uncertainty persists.

Chairman Powell’s term is set to end in May 2026, and the legal threshold for removing a Fed Chair requires “cause,” such as proven misconduct.

July Expectations: Steady Rates Anticipated

Despite increasing expectations for September, the probability of a rate cut in July remains low. The CME FedWatch tool indicates only a 2.6% chance of a cut, with a 97.4% expectation that the Fed will maintain current interest rates.

The Federal Reserve is also weighing new inflationary risks, particularly those stemming from ongoing trade tensions. Recent U.S. CPI data showed a 2.7% increase, surpassing the 2.6% target. However, cooler-than-expected U.S. PPI data offers some support for a potential rate cut.

With the next FOMC meeting approaching, attention is increasingly focused on the potential for policy shifts in September.

Disclaimer: Investment decisions should be based on thorough research and consideration of personal financial circumstances. The author and publication are not responsible for any financial losses.

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