Are Rate Cuts Coming?
Odds now near 92%
Rate-cut momentum is real—and bonds are cheering, too
Stocks popped on the tame inflation print, and bond investors got good news as well: cooler data strengthens the case for easier policy. Futures now put the odds of a September Fed cut in the ~90% range (up from the mid-80s a day earlier and ~57% a month ago)—a big sentiment shift that’s helping Treasury prices across the curve.
The rate forecast just got more rosy
JPMorgan’s chief U.S. economist Michael Feroli pulled his first cut forward to September, and now looks for additional quarter-point cuts in October, December, and January. That’s a notable pivot from his prior “one-and-done in December” view. For context, the Fed last delivered a 50 bp cut in September 2024, followed by two 25 bp moves in November and December before pausing.
Reminder: mortgage rates move on expectations—not the Fed’s announcement
Daily mortgage pricing follows bonds (Treasuries/MBS) and the data that move them (CPI, jobs). That’s why mortgages can be flat—or even rise—on a cut day if markets already priced it in. Anticipation drives your rate more than the headline. So we may see movement long before a Fed cut.
Politics is adding noise, but the market’s compass is still the data
High-profile commentary from the administration (and the Miran Fed Board nomination) has fueled chatter about policy and independence. Practically, traders are still keying off inflation and jobs, but the nomination timing likely won’t be settled before the September meeting.
What markets are pricing now
Futures lean toward at least one cut by September, with roughly 40% odds of two cuts by December and very low odds of “no change” through year-end. Bonds rallied on the CPI release, led by shorter maturities, which is consistent with markets pulling forward the start of easing.
The wild card: tariffs and timing
Tariffs can nudge inflation higher, but the timing is messy. Research shows some price pass-through can hit within a couple months, while broader economic effects can take longer. Either way, the effective tariff rate has jumped in 2025, keeping a small inflation risk in the outlook even as markets bet on cuts.
What this means for you (plain talk)
Rates likely ease into fall, but don’t expect a straight line. Plan around today’s levels and be ready to move on data days (CPI, jobs).
If you’re buying: focus on the payment—use builder incentives, buydowns/credits now there are plenty out there to get you where you need; if the market gifts a dip, you can adjust.
If you’re refinancing: watch for short windows after soft data when lenders pass along improvements.
If you’re a builder/agent: align incentives to hit monthly payment targets; rate headlines help, but execution wins.
Sources: WSJ live coverage of odds and market reaction; Bloomberg and MarketWatch on the rally; Reuters on Feroli and the Miran nomination; Mortgage News Daily and Fannie Mae on what drives mortgage rates; WSJ archive on the 2024 cuts; Yale Budget Lab and Fed research on tariffs and price pass-through