Will the Federal Reserve cut interest rates by 25 basis points in September?

According to CME FedWatch data, as of the time of writing, the probability of a 25 basis point rate cut in September has slightly decreased to 92.1%, while the probability of keeping rates unchanged is at 7.9%.

💸 Reasons for the rate cut

🔸 Weak economic data:

1⃣ Labor market: In July 2025, non-farm payrolls increased by only 73,000, far below the expected 104,000, and the data for May-June was revised down by 258,000, indicating a cooling labor market.

2⃣ Manufacturing: In July, the U.S. manufacturing PMI fell to 48.0 (ISM data) or 49.8 (S&P Global data), both in the contraction zone, indicating that high interest rates are increasingly suppressing the real economy.

🔸 Easing inflation: In June 2025, the PCE price index increased by 2.6% year-on-year, with the core PCE at 2.8%, close to the Federal Reserve's 2% target. In July, the CPI rose by 2.7% year-on-year and 0.2% month-on-month, below expectations, reducing inflation pressure and providing space for a rate cut.

1⃣ Political pressure: U.S. Treasury Secretary Yellen publicly called for a 50 basis point rate cut in September and suggested a total cut of 150-175 basis points for the year. The Trump administration has pressured the Federal Reserve, threatening to replace Chairman Powell with a more dovish official (such as Bowman), which could accelerate the pace of rate cuts.

2⃣ Internal shifts at the Federal Reserve: Federal Reserve officials (such as Goolsbee) have stated that the fall meeting is a window for policy adjustments, and if employment worsens, a rate cut will be an inevitable choice. The internal dovish forces are strengthening, with some officials supporting 2-3 rate cuts within the year.