September Rate Cut Odds Tumble to 39% After PCE Inflation Comes in Hotter Than Expected
Traders are scaling back their expectations for a Federal Reserve rate cut in September, following the release of the latest PCE inflation data. The Fed’s preferred inflation gauge rose 2.6% year-over-year in June—slightly above expectations—dampening hopes of policy easing.
According to CME FedWatch, the probability of a 25 basis point cut in September has fallen sharply to 39.2%, down from 63.7% just a day earlier. The odds of the Fed holding rates steady now stand at 60.8%, suggesting the central bank is likely to pause for a sixth consecutive meeting.
The inflation data showed that Core PCE—excluding food and energy—also rose to 2.8% YoY, above the expected 2.7%. On a monthly basis, both headline and core PCE increased by 0.3%, in line with forecasts. The report also included upward revisions to May’s inflation figures, adding further weight to the Fed’s cautious stance.
This update came just one day after the Federal Reserve held rates between 4.25% and 4.50% at its July meeting—the fifth straight time it’s left rates unchanged. The Fed has avoided cuts so far in 2025, despite growing political pressure. 
Trump Blasts Powell Over Fed Decision
Following the announcement, President Donald Trump once again lashed out at Fed Chair Jerome Powell on Truth Social, accusing him of being “TOO LATE, TOO ANGRY, TOO STUPID, & TOO POLITICAL” for the job. Trump claimed Powell is costing the nation trillions and even mocked his management of federal building renovations.
Trump’s criticism comes as his administration’s aggressive trade policy is contributing to inflation. Powell acknowledged in his FOMC remarks that “tariff-driven inflation is just beginning,” implying that prices may rise further in the months ahead.
He also clarified that the Fed hasn’t made any decision about a potential September cut, noting that it’s unlikely the full inflationary impact of Trump’s tariffs will be clear by then.
With inflation ticking up and political tension intensifying, markets are now bracing for a longer wait before any rate relief materializes.
