The sentiment around a potential Federal Reserve rate cut in September 2025 remains mixed, with no definitive consensus despite strong market expectations. According to a Reuters poll, 61% of economists (67 of 110) predict a 25 basis point cut to a 4.00%-4.25% range on September 17, up from 53% in July, driven by softening labor market data and moderating inflation. However, some Fed officials, including Raphael Bostic, Austan Goolsbee, Jeff Schmid, and Thomas Barkin, express caution, citing persistent inflation above the Fed’s 2% target and uncertainty about tariff-driven price pressures. A hotter-than-expected July PPI report (0.9% monthly increase, core prices at 3.7% year-over-year) has further complicated the decision, raising concerns about pass-through inflation.
Market sentiment, as reflected by the CME FedWatch Tool, shows a near-100% probability of a cut, fueled by favorable July CPI data (2.7% headline, 3.1% core) and revised weaker job growth figures. Treasury Secretary Scott Bessent and some analysts, like Rick Rieder from BlackRock, advocate for a bolder 50 basis point cut, citing labor market concerns. Yet, Fed officials like San Francisco Fed President Mary Daly have downplayed steep cuts, suggesting a more cautious approach.
The “messy” compromise could involve a 25 basis point cut to balance the Fed’s dual mandate—addressing employment risks while guarding against inflation reacceleration. Dissent among FOMC members, with two (Bowman and Waller) already favoring cuts in July, and upcoming data (CPI on September 11, jobs report on September 5) will likely shape the final decision. Fed Chair Jerome Powell’s Jackson Hole speech may provide further clues. A smaller cut or a hold could emerge if inflation data surprises to the upside, reflecting the Fed’s delicate balancing act.