September Rate Cut Now Favored: CME Data Points to 86.2% Probability of 25 Basis Point Move

Market expectations are solidifying around a near-certain Federal Reserve rate reduction in the coming month. Recent derivatives data reveals the odds of the central bank maintaining its current stance stand at just 13.8%, while an 86.2% probability leans heavily toward a 25 basis point cut.

The picture becomes more nuanced when projecting further ahead. By October, the likelihood of holding rates steady drops to 6.7%, opening the door to more aggressive monetary easing. Market participants are currently pricing in two competing scenarios: a cumulative 49.1% chance of another quarter-point reduction (25 basis points), or a steeper 44.2% probability of a half-point cut (50 basis points combined).

This split-scenario outcome reflects growing uncertainty about the Fed’s full policy trajectory beyond the September decision. Traders are essentially hedging between two paths—cautious incremental easing versus more substantial rate relief—suggesting the central bank faces mounting pressure to address economic headwinds.