With weak job data, rising political pressure, and the Fed hinting at policy changes, traders are now betting heavily on the likelihood of a rate cut in September. The market has begun to recover, and this could be the start of a strong rebound in Q4.

September Rate Cut Probability Near 90%

According to CME's FedWatch tool, the probability of the Fed cutting rates in the recent September meeting has risen to 94% and is currently at 88%. Meanwhile, the likelihood that the Fed will cut rates three times in 2025 has surged to 50%, up from just 20% last week.

This rapid shift signals a major policy turning point, benefiting the market, as more rate cuts mean greater liquidity and support for risk assets.

The market also expects three rate cuts by the end of this year. Additionally, Goldman Sachs recently raised its outlook for 2025, forecasting three rate cuts of 25 basis points each, which could occur in September, October, and December.

Mary Daly's Rate Cut Strategy

San Francisco Fed President Mary Daly also noted that two rate cuts this year still seem reasonable, but she is ready to cut further if the labor market continues to weaken. Although it is uncertain whether rates will be cut in September, Daly believes that each upcoming Fed meeting is an opportunity to act and emphasized the need to be flexible as new economic data on inflation and employment reports are expected.

Why Is The Rate Cut Important In September?

Mary Daly's comments came as President Trump continues to push for an immediate rate cut.

A rate cut in September could be key to preventing further economic recession. It could also provide timely support, easing tight policy without having to wait too long. He believes that high interest rates are harming the US economy, slowing job growth, and putting pressure on the markets.

After disappointing job numbers, Trump fired Labor Statistics Chief Erika McEntarfer and increased pressure on Fed Chairman Jerome Powell, hinting at major changes ahead. Trump also announced plans to nominate a new Fed Governor who supports rate cuts.

The Market Witnesses a Recovery

Wall Street rebounded on Monday after a sharp sell-off last week, thanks to increasing expectations for a rate cut. The cryptocurrency market also saw a recovery as traders reacted to weak US job data and rising expectations for a rate cut.

Crypto Eyes Q4 Recovery

Analyst Alex Krüger believes that the recent cryptocurrency downturn is just a smaller repeat of last August's collapse. However, he remains optimistic as expectations of rate cuts, tighter regulations on cryptocurrency, and broader adoption will drive prices higher in Q4.

He also predicts that Bitcoin could reach $200,000 - $250,000 by mid-2026, especially if the Fed takes a more dovish stance and the economy remains strong.

Other analysts also compare this to 2024, when the Fed's policy shift helped Bitcoin double by the end of the year. If history repeats itself, September and October could be strong growth months for cryptocurrency.

Bitcoin recovered to $114,345 on Monday, after dropping below $112,000 over the weekend. Ethereum rose 2.6%, while altcoins like Cardano and XRP surged by up to 8%. Bitcoin is currently trading at $114,911.

With expectations for a rate cut rising and cryptocurrencies recovering, all attention is now focused on the Fed's next move.