In recent months, financial markets have been remarkably clear about one thing: they’re pricing in interest rate cuts—significant ones—and they’re doing it regardless of what Federal Reserve Chair Jerome Powell says or signals.

Despite Powell’s ongoing caution, the market appears to be betting heavily that the Fed will start easing monetary policy before the end of the year. In fact, traders are assigning close to an 80% probability that at least one rate cut will happen by October. That means the Fed funds rate—currently held steady in a higher-for-longer stance—may not stay put for much longer.

The Market’s Timeline for Cuts

Looking at the pricing in futures markets, investors seem convinced that a pivot is not just coming, but imminent. Here’s the projected path of rate adjustments across the Fed’s upcoming meetings:

• July 30, 2025: A modest rate cut is already expected, around 12.4 basis points, indicating early signs of policy easing.
• September 17, 2025: The outlook grows bolder, with pricing implying a 57% chance of a cut, and a larger one at that—nearly 70 basis points.
• October 29, 2025: Market expectations show an even deeper cut, around 123 basis points, suggesting policymakers may be forced to act more aggressively if economic conditions weaken.
• December 10, 2025: By year-end, the total implied cuts reach approximately 186 basis points, with over 63% odds of additional easing.

These projections reveal a growing disconnect between official Fed communication and investor sentiment. It’s as if traders have stopped listening to Powell’s insistence that rates will remain elevated to combat inflation. Instead, they’re focusing on signs of economic slowing, softening labor markets, and the potential risk of recession.

Why Markets Are Betting on Cuts

So what’s driving this confident expectation of rate cuts?

1. Economic Slowdown Signals: Leading indicators suggest that the economy may be cooling. Consumer spending, job growth, and manufacturing output have all shown signs of fatigue.
2. Inflation Cooling Off: While inflation remains above the Fed’s 2% target, the pace of price increases has been slowing. If this trend continues, the Fed could justify a more accommodative stance without risking inflation flaring back up.
3. Global Growth Concerns: With China facing structural economic challenges and Europe experiencing stagnation, the global macro environment may pressure the U.S. to act preemptively to protect its own momentum.
4. Political Pressure: Heading into an election year, there’s often increased scrutiny of central bank decisions. While the Fed is officially independent, there’s no denying the potential influence of a shifting political landscape.

Investors Don’t Need Powell’s Permission

Whether Powell likes it or not, the markets have made up their minds. Futures contracts, options pricing, and yield curves all reflect a strong consensus: rate cuts are coming, and they’re coming soon. The central bank’s cautious rhetoric hasn’t shifted that narrative.

In the end, while the Fed controls the policy lever, the market sets expectations—and right now, it’s calling for a reversal of the tightening cycle. Whether or not Powell agrees, investors are positioning themselves for a world where interest rates are lower by the end of 2025.