The market’s confidence in a September Federal Reserve rate cut has taken a sharp turn. Just last week, investors priced in a near certainty of a cut, with probabilities sitting at 99%. That optimism slipped to 85% yesterday and has now dropped further to just 71.5%.
Why the Shift?
FOMC minutes revealed policymakers remain more concerned about inflation than unemployment.
Producer Price Index (PPI) data for July showed that prices are beginning to rise again, signaling that inflationary pressures remain alive.
Jobless claims came in at 235,000 — higher than expected, but not severe enough to force the Fed’s hand.
Spotlight on Jackson Hole
All eyes are now on Federal Reserve Chair Jerome Powell, who will deliver a highly anticipated speech at the Jackson Hole Symposium. Investors are bracing for any hints about the Fed’s direction heading into the September 17 FOMC meeting.
The Bigger Picture
The Fed is balancing a delicate equation: keeping inflation under control while avoiding too much damage to the labor market. While many had hoped for a swift return to lower rates, the latest signals suggest patience will be required.
Bottom line: The era of easy money hasn’t returned yet. Investors and businesses should prepare for uncertainty, manage risk carefully, and stay flexible in the weeks ahead. $BTC