FedWatch signals cuts at all three remaining 2025 meetings likely after jobs data disappoints
A Federal Reserve interest rate reduction now appears all but certain in September, with FedWatch also predicting further cuts in the final two decisions of the year, after the latest US jobs report revealed weaker hiring and rising unemployment.
Markets reacted swiftly to the Bureau of Labor Statistics’ August release, which showed only 22,000 jobs added, far below the 76,500 economists had expected. The unemployment rate edged up to 4.3% from 4.2%.
Economists see Fed action as jobs market cools
“The slowdown in the job market should be more than enough for the FOMC to cut its short-term rate target at its September meeting, as this is not a picture of an economy at ‘maximum employment,’ and the greater risk now appears to be that the job market will slip further in the months ahead,” said MBA SVP and Chief Economist Mike Fratantoni. “The pace of any additional cuts will certainly be tempered by the ongoing risk of a pickup in tariff-induced inflation.”
CME Group’s FedWatch tool, a widely followed barometer of market expectations, now projected a near-100% probability of cuts at each meeting through year-end.
Mortgage professionals weigh opportunity and risk
For mortgage professionals, the “potential 25-basis-point rate cut at its September meeting” represented an opportunity, according to First American Senior Economist Sam Williamson.
“A rate cut in September would mark the first step in that adjustment, and could put downward pressure on long-term yields, offering some relief to prospective home buyers facing elevated mortgage rates and prices. For those still on the sidelines, this could be the opening drive that begins to move the chains on affordability—especially if inventory improves and price growth continues to moderate,” he said.
Downward revisions deepen concerns
The latest BLS report, the first since President Donald Trump fired the bureau’s commissioner over what he called “scam” data, also included downward revisions for prior months. July’s job gains were cut to 73,000, and June’s numbers were revised to a loss of 13,000 jobs—the first monthly decline since December 2020.
“Revisions to prior months added to the softness… and is a key metric the Fed is watching closely for signs of slack. With inflation not reaccelerating and job growth fading, the Fed may see this as an opportunity to recalibrate—shifting policy back toward neutral, rather than launching a full pivot to stimulus,” Williamson noted.
