Most meetings could have just been an email—but there’s one upcoming get-together that no investor will want to miss.
The next FOMC meeting concludes exactly one week from today, and expectations for an impending rate cut are sky-high: The CME FedWatch tool shows that the market foresees a 92% chance of a quarter-point rate cut and a 8% likelihood of a half-point cut after the Fed’s September meeting. The Fed itself has projected two interest rate cuts in 2025, though there are some outliers among the governors who are calling for more.
Today’s PPI data lent more credence to the idea that rate cuts are right around the corner. Wholesale inflation fell 0.1% last month instead of rising 0.3% the way economists expected, marking the first time PPI has declined in four months—and opening the door to interest rate cuts even wider.
President Trump certainly believes that today’s PPI reading means “Too Late” Jerome Powell should cut rates. “Just out: No Inflation!!! “Too Late” must lower the RATE, BIG, right now,” he posted on Truth Social.
But what are the crystal balls on Wall Street saying?
After the latest disappointing jobs market data last week, Bank of America’s vision of the future got a little clearer. The bank went from anticipating zero rate cuts this year to a total of two quarter-point cuts in 2025, with three more cuts next year. Goldman Sachs thinks it’s more likely that we’ll get three quarter-point cuts this year, and two cuts in 2026. That 3-2 or 2-3 split seems to be the most common call on the Street at the moment.
Buyer beware
An interest rate cut may seem to be in the market’s best interest, but chief global strategist at JPMorgan Asset Management David Kelly recently warned that it isn’t so simple.
Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.
In an interview with CNBC, Kelly pointed out that many retirees have stored their savings in US treasury bonds—a fixed income investment that will take a beating from an interest rate cut. And while a rate cut should theoretically incentivize businesses and consumers to borrow more money, Kelly noted that the expectation of further rate cuts ahead may mean that borrowers wait until rates get even lower—curtailing hopes of a stronger economy as soon as the first rate cut arrives.
One last wrinkle: Trump has nominated chair of the Council of Economic Advisers Stephen Miran to replace Adriana Kugler, and Miran’s nomination has now advanced to a full Senate vote. That vote could happen as soon as this week, according to Barron’s—meaning Miran may take his post at the Fed in time to play a role in the FOMC’s interest rate decision.
Like we said, you won’t want to miss the two-day FOMC meeting beginning on September 16.—MR