Fed Interest Rate Cuts: Market Expectations for September 17th Meeting

Market Expectations for Fed Action

• 🎯 Markets have fully priced in at least a 25 basis point interest rate cut at the September 17th FOMC meeting.
• 📊 The CME Fed Watch tool indicates an 85.8% probability of a 25 basis point cut and a 14.2% chance of a 50 basis point cut.
• 📈 There is a 0% probability currently priced in for the Fed holding interest rates steady.

Economic Indicators Influencing the Fed

• 📉 Recent jobs data suggests a weakening economy, with August non-farm payrolls falling 53,000 short of expectations.
• 💼 Private sector non-farm payrolls also missed expectations, falling by 37,000.
• ⚠️ Unemployment has risen to 4.3%, and average hourly earnings growth has slowed to 3.7% year-over-year.

Shifting Fed Priorities

• 💡 The consistent pattern of softer employment data over two months signals to the Fed that it is time to prioritize economic growth.
• 💰 Inflation reports are currently considered less critical than the employment figures in guiding the Fed's decision.