Federal Reservoir Bank Chairman Jerome Powell and the Federal Reserve anticipate a high likelihood, surpassing 80%, of reducing interest rates in September.

Federal Reserve Rate Cut Likely in September 2025, According to Analysts

There's a high probability that the Federal Reserve will cut interest rates in September 2025, with the likelihood estimated to be in the 85-95% range. This prediction is based on recent economic analysis, and it has sparked anticipation ahead of Jerome Powell's appearance at the Jackson Hole Economic Symposium on August 22, 2025.

Powell's speech at the symposium will be closely monitored for any hints about the Fed's thinking regarding interest rates. Analysts generally expect a 25 basis point cut in September, with Morgan Stanley forecasting cuts in both September and December. However, there is some variation in market probabilities and views, with JPMorgan not expecting a cut in September, while futures markets assign about a 40-75% chance for a September reduction.

If the interest rates do indeed decrease, it could have several implications. For instance, investments like stocks and other riskier assets might become more attractive, potentially leading to higher prices. On the flip side, a rate cut can make existing bonds worth less if their fixed interest rate is now lower than new bonds being issued. Additionally, a cut could weaken the U.S. dollar against other currencies.

For businesses, a rate cut could mean more affordable borrowing, making it easier to invest in new equipment, hire more people, or expand operations. Consumers could also benefit, with lower monthly payments on mortgages, car loans, and credit cards becoming a possibility.

Powell has emphasized that the Fed is "data-dependent," basing decisions on the latest economic information. In the Fed's July 30, 2025, statement, Powell shared that they were keeping rates at the current 4.25%-4.50% level while they "assess incoming data, the evolving outlook, and the balance of risks."

Powell also pointed out that while economic activity has been expanding at a solid pace, inflation is still "elevated," and the job market has "shown signs of improving." Despite this, Powell reiterated the Fed's commitment to getting inflation down to 2% and supporting maximum employment.

Powell made it clear that the Fed is "prepared to adjust" its policy if they see new risks. As the anticipation builds ahead of the Jackson Hole Economic Symposium, investors and businesses alike will be eagerly awaiting Powell's words for any insight into the Fed's plans for interest rates in the coming months.