Markets Expect Fed Rate Cut to 3.75–4.00% Tomorrow

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  CME FedWatch shows 99.5% chance of rate cut
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  Expected new rate range: 3.75–4.00%
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  FOMC meeting decision due tomorrow

With just hours to go until the next Federal Open Market Committee (FOMC) meeting, market expectations are firmly aligned: a rate cut is all but certain. According to CME FedWatch Tool data, traders are pricing in a 99.5% probability that the Federal Reserve will reduce interest rates to a 3.75–4.00% range.

This strong consensus signals how much investor sentiment has shifted in recent weeks, driven by softer inflation readings, slowing economic indicators, and rising geopolitical uncertainties.

Why the Fed May Cut Rates Now

The U.S. central bank has kept interest rates high to combat inflation, but recent data suggests the economy may be cooling. Consumer prices have eased, wage growth has moderated, and job creation has slowed slightly. These trends give the Fed some breathing room to begin loosening its monetary policy.

A cut to 3.75–4.00% would be the first rate adjustment in months and a major signal that the Fed is pivoting toward a more supportive stance for growth and liquidity.

How Markets Are Reacting

Bond yields have dipped in anticipation of the move, and stock markets have responded positively to the likelihood of cheaper borrowing costs. Lower interest rates typically boost asset prices, ease debt burdens, and support corporate earnings.

However, some analysts caution that cutting too soon could reignite inflation. The Fed will need to balance these risks carefully in its post-meeting communication.

Investors will be closely watching Fed Chair Jerome Powell’s press conference for insights into the central bank’s outlook and how many cuts might follow in the coming months.