The week of September 15 to 19, 2025 is going to be heavily influenced by how much the Federal Reserve’s Jerome Powell will finally capitulate in an interest rate cut. The market is almost positive that the effective target range of Fed Funds will be cut. The question is whether it will be too slow to make a difference.
Jerome Powell as the Chairman of the FOMC has flopped from what had been a perpetual “we will be data-dependent” into a more recent “we are worried about potential supply shocks” posture. Inflation is not really in the target 2.00% to 2.50% level, but it is running under 3.0%.
The ace in the hole for a rate cut was the latest jobs revision from the Labor Department. It showed that the revised number of jobs was a whopping 911,000 fewer jobs added during the period measured (April 2024 to March 2025).
If Powell cuts too little or too slow it is unlikely to have the economic impact that prior rate cuts have had. If he cuts too fast, in theory, it could stoke inflationary pressures all over again. Please understand that any interest rate cut takes weeks to months before it starts to really be felt and seen by borrowers. And there are no assurances that any rate cut in Fed Funds will translate into lower mortgage rates. A 0.25% rate cut on $100,000 borrowed is only a savings of $250.00 per year when using straight line math.
The current Fed Funds Target Rate is 4.25% to 4.50%. The CME FedWatch Tool uses real-time futures trading around Fed Funds contracts to make its forecasts:
- SEP 17 2025 — 93.4% at -0.25% in a 4.00% to 4.25% range
- OCT 29 2025 — 79.0% at -0.25% in a 3.75% to 4.00% range
- DEC 10 2025 — 74.0% at -0.25% in a 3.50% to 3.75% range
The period from JAN 2026 to APRIL 2026 also becomes less clear:
- JAN 28 2025 — 47.6% flat at 3.50% to 3.75%; 38.7% at -0.25% to 3.25% to 3.50% range
- MAR 18 2025 — 43.4% also at 3.25% to 3.50% range
- APR 29 2026 — 39.0% also at 3.25% to 3.50%… 21.4% up 0.25% and 28.0% cut 0.25%
Now going all the way out to December 2026 and it becomes much less certain about where interest rates will drift down to at the DEC 9 2026 meeting:
- 17.6% at 2.50 to 2.75% range;
- 27.4% at 2.75% to 3.00% range;
- 26.2% at 3.00 to 3.25% range;
- and 14.8% still at 3.25% to 3.50% range.
These were the closing yields for Friday, September 12, 2025 from the Wall Street Journal table:
- 30-Year 4.683%
- 10-Year 4.070%
- 7-Year 3.819%
- 5-Year 3.636%
- 3-Year 3.536%
- 2-Year 3.625%
- 1-Year 3.658%
Buckle up.
