Amid the pressure President Trump has been piling on Federal Reserve Chair Jerome Powell, traders are now leaning heavily toward the idea of a small rate trim. CME’s Fedwatch data shows an 85.7% probability that a quarter-point cut is on the horizon, making it the clear favorite in the market’s playbook.
Prediction Markets and CME Fedwatch Data Place Sky-High Odds on Fed Rate Cut for September
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Kalshi, Polymarket, and Wall Street Bet Heavily on Rate Trim
Markets are now weighing whether the U.S. central bank could be preparing for some rate relief, especially with President Trump persistently calling out Powell for not lowering the federal funds rate. The last time the Federal Reserve cut rates was Dec. 18, 2024, and since taking office, Trump has made it clear he’s unhappy it hasn’t moved.
The next Federal Open Market Committee (FOMC) meeting is scheduled for September, and traders are leaning heavily toward a modest rate cut. On Polymarket, traders are betting big on a modest 25-basis-point cut at the Fed’s September meeting, assigning it a 73% probability.
The Polymarket odds for a heftier 50-plus-point reduction trail far behind at just 8%, while a “no change” scenario holds a 20% chance. A rate hike? Virtually nonexistent at 1%. Overall, sentiment strongly favors a small, measured trim over any bold moves.
On the U.S.-regulated prediction platform Kalshi, traders are putting a 72% probability on the Fed delivering a 25-basis-point cut in September. Kalshi bettors place the chance of rates staying put at 19%, while a deeper cut of more than 25 points holds just a 9% likelihood.
The outlook here mirrors Polymarket’s—expecting a small, calculated rate trim rather than a dramatic policy shift. CME Fedwatch data shows traders assigning an 85.7% probability that the Fed will trim rates by 25 basis points in September, lowering the target range to 4.00%-4.25%.
The odds of holding steady at the current 4.25%-4.50% range are just 14.3%, signaling strong market conviction that a modest cut is coming. If market sentiment from Wall Street and prediction market participants proves accurate, September could mark the start of a gentler Fed policy path, signaling the central bank’s willingness to make measured adjustments rather than sweeping changes.
Such a move may calm some of the political heat and soothe Wall Street, but it will also set the tone for how the central bank navigates the rest of the year’s economic challenges, like dealing with tariffs.
