Until recently, the rate cut in September seemed almost certain, as anticipated by Goldman Sachs. The CME (Chicago Mercantile Exchange) futures market, through its FedWatch tool, still assigned a 96% probability to a reduction of the main interest rate to 4–4.25%.
However, the wind has changed. Following the release of the July PPI, this probability has dropped to 92.8%. A seemingly modest correction, but revealing a shift in perception. The market is starting to doubt. And these doubts also extend to other prediction platforms.
In Kalshi, a 25 basis point cut in September remains the most considered scenario at 76%, but the status quo rate rises to 21%, signaling increasing caution.
Market platforms reflect this shift in expectation in a quantified and unambiguous manner:
▫️CME FedWatch Tool: 92.8% probability of a cut to 4–4.25% (down from 96% previously) and 7.2% probability of maintaining the rate;
▫️Kalshi: 76% of bettors anticipate a 25 basis point cut, 21% consider a status quo, and 4% bet on a larger cut (>25 bps);
▫️Polymarket: 72% probability of a 25 basis point cut, 23% for a status quo, 5% for a 50 bps cut, and 1% for a hike.
These differences, although subtle, reflect a slow but tangible reconfiguration of expectations. The release of the PPI served as a reminder that inflation is not under control, complicating the argument for a rapid monetary pivot.
Although the majority of the market still leans toward a easing, traders are adopting a more measured tone, reflecting an increased awareness of latent macroeconomic risks.
