Rate Futures Show 80% Chance of Fed Cut by September, Down from 98% Before Jobs Report

Markets now price an 80% probability of a Fed rate cut by September, down sharply from 98% before the latest jobs data.
The shift reflects stronger-than-expected labor market resilience, reducing urgency for immediate easing.
Analysts warn cuts may not materialize in 2024 unless unemployment rises or payroll growth turns negative.

Fed Rate Cut Odds Retreat After Strong Jobs Data

Interest rate futures have sharply dialed back expectations for a Federal Reserve rate cut by September, with the probability falling to around 80% from nearly certain (98%) before Friday’s jobs report. The recalibration follows a solid employment print that showed steady hiring and an unemployment rate holding at 4.2%, complicating the case for near-term monetary easing.

Traders had previously bet heavily on a September cut, but the odds have since narrowed as inflation concerns persist and the labor market defies slowdown predictions. The CME FedWatch Tool now shows just a 21% chance of a July cut, down from over 50% earlier this month. "The Fed’s hands are tied unless the jobs market cracks," said one strategist familiar with central bank thinking, who asked not to be named discussing sensitive market views. "Right now, the data doesn’t justify rushing into cuts."

Political and Economic Crosscurrents

The Fed faces mounting political pressure—particularly from former President Trump—to lower borrowing costs, but policymakers have emphasized data dependence over external influence. Meanwhile, new U.S. tariffs on imports have added inflationary risks, further muddying the outlook. Morgan Stanley analysts now project no cuts through 2025 unless unemployment climbs above 4.5% or payrolls contract.

Borrowers, from homeowners to corporations, will feel the pinch if rates stay higher for longer. Yet with the economy still expanding, the immediate pain may be limited—barring a sudden downturn. "Markets are waking up to the reality that the Fed might not ride to the rescue this year," noted a fixed-income trader in New York. "It’s a waiting game now."