Federal Reserve Rate Decision: Market Odds Heavily Favor Steady Rates into September

Based on the latest CME Fed Watch data released on July 21, markets are pricing in a remarkably high cumulative probability for rate stability in the near term. Here’s what the numbers reveal about investor expectations.

July Decision: Rate Hold Nearly Certain

The odds overwhelmingly suggest the Federal Reserve will maintain its current interest rate level in July, with a 95.3% probability assigned to no change. Only a 4.7% cumulative probability remains for a 25 basis point reduction this month, indicating minimal market expectations for an immediate policy shift.

September Outlook: Divergent Expectations Emerge

Looking ahead to September, market sentiment becomes considerably more fragmented. The probability of unchanged rates drops to 39.3%, suggesting traders increasingly anticipate monetary policy adjustments.

A 25 basis point cumulative rate cut carries a 58% probability—the most likely scenario—while an additional 50 basis points of cumulative reduction carries a marginal 2.7% chance. This distribution indicates the market is pricing in a measured approach to policy normalization rather than an aggressive shift.

What This Means for Traders

These CME-derived probabilities reflect real-time market positioning and serve as crucial barometers for asset allocation decisions. The sharp contrast between July’s near-certain hold and September’s 60% probability of some form of reduction signals growing conviction among large traders that rate cuts are coming—just not immediately.