76% Bet on Fed Rate Cuts in Sept. After Inflation Dips

Key Insights:

• Polymarket shows 76% odds of a 25 bps fed rate cuts in Sept.
• U.S. inflation index drops to 1.67%, fueling dovish expectations.
• Weak jobs data drives a sharp shift in rate cut betting odds.

Markets now price in a 76% chance of a 25 bps Fed rate cut in Sept., following a drop in the U.S. inflation index to 1.67% and weak jobs data, fueling speculation of an imminent policy pivot from the central bank.

Traders See September Fed Rate Cuts as Almost Certain

Markets have turned increasingly confident that the Federal Reserve will lower interest rates at its Sept. 17 meeting. As of Aug. 1, Polymarket data showed a 76% probability that the U.S. central bank will cut rates by 25 basis points.

Only 21% of market participants expect no change, while a deeper 50 bps cut held just a 4% chance.

The shift in sentiment comes amid renewed signs of cooling inflation and weaker labor data. According to Eric Daugherty, the U.S. Inflation Index dropped sharply to 1.67%, reigniting calls for the Fed to ease monetary policy.

“CUT THE RATES JEROME!” Daugherty wrote in a post on X after the data release.

Odds Surge After Jobs Weakness and Inflation Plunge

The momentum toward Fed rate cuts strengthened following a flurry of macroeconomic signals. Shay Boloor, an equities commentator, highlighted that Polymarket rate cut odds surged from +150 to -260 in response to disappointing jobs numbers.

Investors had previously priced in a longer pause. But the drop in inflation now well below the 2% target and signs of labor market softness shifted expectations. Analysts say the Fed may no longer be able to justify holding rates high as deflation risks rise.

“BREAKING: 🇺🇸 FED RATE CUTS ARE LIKELY COMING IN SEPTEMBER !!!” Ash Crypto posted on X in reaction to the market repricing.

The Fed has so far maintained its policy rate in a range of 5.25% to 5.50% the highest level in over two decades. However, cracks have emerged in the central bank’s tightening stance as disinflation gains traction.

Market Bets Signal Pivot, But Fed Has Final Say

While Polymarket odds and traders’ posts point to a cut, the Fed has made no official commitment. Chair Jerome Powell and several officials have maintained that further policy decisions will depend on incoming data.

Still, the probability figures reflect market expectations, not policy guarantees. A 76% chance means most traders are aligned toward a cut, but it also leaves room for a hold if data shifts in the coming weeks.

There are 46 days left until the next Federal Open Market Committee (FOMC) decision. That leaves ample time for inflation, unemployment, and growth data to reshape forecasts.

Powell’s most recent public remarks emphasized the Fed’s dual mandate price stability and full employment. If inflation stays under 2% and job losses continue to mount, pressure will likely increase on the central bank to act.

Bitcoin, Equities Could React to Fed Rate Cuts Decision

A rate cut in Sept. would mark the first Fed pivot since it began tightening in March 2022. Traders in both crypto and equities markets are watching closely.

Lower interest rates typically boost risk-on assets like Bitcoin and tech stocks. The falling inflation print and rising cut probabilities could fuel renewed demand across speculative markets.

For now, attention remains on the evolving economic data. If indicators continue trending downward, the Fed may be compelled to adjust its stance faster than anticipated.

Polymarket’s real-time probabilities provide a snapshot of that changing landscape and as of now, the market speaks loud and clear.

“76% expect the Fed to cut,” the chart reads.

Now all eyes are on Powell to see if he agrees.