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Investors Bet on Fed's Rate Cut Revival in September 2025
25 Aug
Summary
- Investors expect Fed to cut rates in September 2025, 9 months after last cut
- S&P 500 has rallied in year after 10 out of 11 past rate cut pauses
- Fed Chair Powell signals rate cut may be warranted due to job market concerns
As of August 25th, 2025, investors are betting that the Federal Reserve will resume interest rate cuts in September 2025, nine months after its last reduction in December 2024. This prolonged pause could be particularly bullish for equities, potentially extending and broadening the stock market's rally, according to analysts.
One reason for this optimism lies in historical precedent. Ryan Detrick, chief market strategist at Carson Group, noted that the S&P 500 has rallied in the year following 10 out of the past 11 times when the Fed waited between five and 12 months before cutting rates again. While the exact cause is difficult to pinpoint, Detrick suggested that investor psychology may play a role, as the return to a more dovish Fed language helps alleviate previous concerns.
This backdrop may help explain the strong investor reaction to Fed Chair Jerome Powell's comments on Friday, August 22nd, 2025. Powell signaled that a rate cut may be warranted given growing concern about the health of the job market, marking a subtle but meaningful shift in the central bank's stance.
