Trump fumes as Fed rate cut 2025 hopes fade, markets eye September instead

Investors anticipating a Fed rate cut in July are likely to be disappointed, with a staggering 93.3% probability that the U.S. Federal Reserve will hold interest rates steady at its upcoming meeting.

The Fed’s reluctance to ease policy, despite record highs in equities and Bitcoin, has drawn sharp criticism from President Donald Trump, who has repeatedly pressured Chair Jerome Powell to lower borrowing costs.

The Fed last cut rates in December 2024 under the Biden administration, bringing the federal funds rate (FFR) to 4.25%-4.50%. Since then, the central bank has remained on pause, even as other global banks have begun easing.

With inflation still above target and the labor market resilient, the Fed appears unwilling to risk reigniting price pressures—a stance that could shape market movements for months.

Why the Fed is likely skipping a July rate cut

According to the CME FedWatch Tool, traders assign just a 6.7% chance of a July Fed rate cut, with 93.3% expecting no change. Prediction markets like Polymarket and Kalshi echo this sentiment, pricing in a 5% and 6% likelihood, respectively.

“The data simply doesn’t justify a Fed rate cut right now,” said Diane Swonk, chief economist at KPMG. “Employment remains strong, and while inflation has cooled, the Fed won’t act until it’s confident the battle is won.”

The Fed’s cautious approach contrasts with market optimism, which has pushed stocks and bitcoin to all-time highs. However, some analysts warn that prolonged high rates could eventually weigh on risk assets.

September emerges as new Fed rate cut battleground

While July appears off the table, traders are increasingly betting on a September Fed rate cut. The CME FedWatch Tool shows a 63.9% probability of a quarter-point reduction, with a 4.4% chance of a more aggressive half-point move.

“September is the new July,” remarked David Rosenberg, chief strategist at Rosenberg Research. “If inflation trends lower and hiring slows, the Fed will have cover to ease. But until then, Powell won’t budge.”

Still, 31.7% of traders expect no action in September, reflecting uncertainty over the economic trajectory. Upcoming jobs and CPI reports could dramatically shift expectations ahead of the Fed’s July 30 decision.

Trump’s Fed feud escalates as election looms

President Trump has repeatedly lashed out at the Fed, accusing Powell of keeping rates high to undermine economic growth. “We have the strongest economy in history, but the Fed refuses to do its job,” Trump said at a recent rally. “They’re hurting American workers.”

The Fed’s independence has become a flashpoint in the 2025 election cycle, with Trump allies pushing for more dovish policy. However, economists warn that political pressure could backfire.

“The Fed’s credibility depends on its ability to ignore short-term politics,” said former Fed economist Claudia Sahm. “If markets sense Powell is bending to Trump, volatility could spike.”

What delayed Fed rate cuts mean for markets

With a July Fed rate cut nearly ruled out, investors are adjusting their strategies:

• Equities: Stocks may face pressure if earnings weaken under high rates.

• Crypto: Bitcoin’s rally could stall if liquidity remains tight.

• Bonds: Treasury yields may stay elevated until the Fed signals easing.

“The longer the Fed waits, the harder the landing could be,” warned Mohamed El-Erian, chief economic advisor at Allianz. “Markets are priced for perfection, but perfection is rare.”

As the countdown to the July 30 meeting begins, all eyes will be on Powell’s press conference and whether he hints at a September Fed rate cut. For now, patience is the new market mantra.