Market Bets Peak at 91.8%: Fed Rate Cut Odds Surge After CPI Release, With Cumulative Probability Showing Bold September Expectations

Fresh inflation data has dramatically shifted the market narrative around the Federal Reserve’s next moves. CME Fed Watch tools now reflect a striking 91.8% probability that the central bank will deliver a 25 basis point rate cut when it convenes in September, up sharply from the 82.5% odds traders had priced in before the CPI numbers hit the tape. Only 8.2% of market participants are currently betting on a hold at that meeting.

The implications extend well beyond a single rate cut. When examining the cumulative probability across a two-meeting window, traders are factoring in more aggressive Fed action: there’s a 31% chance of cumulative cuts totaling just 25 basis points by October, but the heavier positioning sits at 66.7% odds of cumulative reductions hitting 50 basis points over the same period. Meanwhile, just 2.2% of the crowd is banking on rates staying frozen through October.

This shift in positioning reflects traders’ evolving expectations heading into the Federal Reserve’s scheduled FOMC gatherings on September 17 and October 29. The market consensus that’s emerged is particularly telling: investors are doubling down on the view that September will see initial easing, with follow-up cuts likely in December as well. The recent data has essentially reset the baseline scenario, moving from tentative optimism about potential cuts to near-certainty that the first reduction is coming sooner rather than later.