Markets are increasingly anticipating that the Federal Reserve (Fed) will implement its first interest rate cut by September 2025, with a 91% probability of a 25 basis points reduction. The Fed, which once aligned closely with the European Central Bank (ECB) and the Bank of England (BOE), has diverged in its approach. In 2025, the ECB has lowered rates twice, with its current borrowing costs over 2% lower than those in the U.S. Meanwhile, the BOE has also cut rates amid geopolitical uncertainties. Fed Chair Jerome Powell has suggested that U.S. rate decisions have been influenced by tariffs, contributing to a cautious stance. Despite the predictions of a rate cut, analysts from Bank of America argue that the labor market and consumer spending are not as weak as perceived, hinting that economic conditions are still robust, potentially delaying the Fed's decision to cut rates. With only 42 days to go until the Fed’s next meeting, the situation remains fluid, leaving room for significant changes in outlook.

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