The likelihood of the Federal Reserve reducing interest rates by 25 basis points in September is currently 68%, according to CME’s “Fed Watch” tool as reported by Jinshi Data on August 27. The tool also indicates a 32% probability of a more aggressive 50 basis point cut in September. As the year progresses, expectations for further rate reductions increase. By November, the probability of a 50 basis point cut rises to 48.7%, a 75 basis point cut to 42.2%, and a 100 basis point cut to 9.1%.
This outlook aligns with recent comments from San Francisco Fed President Mary Daly. Speaking on Monday, Daly signaled her support for starting rate cuts, stating, “The labor market has achieved full balance. The time has come to adjust policy.” Her comments echo those of Fed Chairman Jerome Powell, who expressed similar sentiments at last week’s Jackson Hole Symposium. Powell indicated confidence that inflation is on track to return to the Fed’s 2% target and hinted that the time to modify policy may be approaching.
Despite the growing consensus around easing policy, Daly emphasized that reducing inflation to the 2% target remains a priority. However, she also acknowledged the need to balance this goal with minimizing harm to the labor market as restrictive policies are adjusted.
