Fed rate cut seen almost certain after July inflation data, Bessent signals

The probability of a US Federal Reserve rate cut in September has surged to near certainty after fresh data showed inflation rising at a moderate pace in July and Treasury Secretary Scott Bessent hinted that a larger-than-usual cut could be on the table.

As per Reuters, traders in contracts tied to the Fed’s benchmark rate on Wednesday placed the odds of a quarter-point reduction at 99.9 per cent for the September 16–17 policy meeting. The estimates, calculated by the CME Group’s FedWatch tool, followed the release of July Consumer Price Index (CPI) data and later comments by Bessent.

Bessent told Bloomberg television that weak labour market data could justify an aggressive 50-basis-point cut. He noted that the Fed used similar concerns over a softening job market to deliver a larger cut last September.

Labour market revisions sway outlook

According to Reuters, Bessent’s remarks were rooted in recent revisions by the US Bureau of Labor Statistics, which showed that job growth slowed sharply in May, June and July. Earlier preliminary estimates had indicated stronger employment, allowing Fed officials to argue that the labour market was holding firm.

“If we’d seen those numbers in May, in June, I suspect we could have had rate cuts in June and July. So that tells me that there’s a very good chance of a 50 basis-point rate cut in September,” Bessent said.

Political tension over policy timing

The prospect of a larger September cut comes amid political scrutiny. US President Donald Trump has criticised last year’s pre-election rate cut as politically motivated, citing its timing ahead of the November vote.

With inflation contained, jobs growth slowing, and political rhetoric heating up, markets are bracing for what could be the Fed’s most closely watched decision this year.

(With inputs from the agencies)