BlackRock's Bold Prediction: A 50 Basis Point Fed Rate Cut Coming This September?

2025-08-12 general

Washington, Tuesday, 12 August 2025.
BlackRock anticipates a significant shift in monetary policy. Rick Rieder predicts the Federal Reserve will slash interest rates by 50 basis points in September. This aggressive move follows the latest CPI data showing lower inflation. The anticipated rate cut could boost market sentiment and investment in the semiconductor industry, benefiting giants like Nvidia and TSMC. Will the Fed deliver this substantial cut, potentially mirroring the easing cycle of September 2024?

Rieder’s Rationale for a Rate Cut

Rieder, BlackRock’s global fixed income investment chief, argues a 50 basis point reduction would align the federal funds rate with long-term inflation expectations and increased productivity across various sectors [1][2]. He anticipates the Fed will initiate rate cuts in September, advocating for a substantial immediate reduction [1][2]. One basis point equals 0.01%, making this a 0.5% decrease [1]. Such a move would mirror the Fed’s initial easing during the September 2024 cycle [1].

Inflation Data Supports BlackRock’s Stance

The Bureau of Labor Statistics (BLS) reported that the July CPI increased by 0.2% month-over-month and 2.7% year-over-year [1]. The annual increase was below the market’s projected 2.8% [1]. Rieder had previously suggested the possibility of a 50 basis point cut following the July non-farm payroll report, which indicated a slowdown in the job market [1]. BlackRock currently manages $3.1 trillion in fixed income assets for its clients [1].

Mixed Signals from Core CPI

The core CPI, excluding food and energy, rose by 0.3% month-over-month and 3.1% year-over-year [1]. These figures either met or slightly exceeded market expectations of 0.3% and 3%, respectively [1]. The monthly increase was the highest since January, while the yearly increase was the highest since February [1]. Market analysts suggest that while core CPI indicates some persistent price pressures, the overall slowdown in inflation reinforces expectations for a significant Fed rate cut in September [1].

Market Anticipation and FedWatch Predictions

The CME Group’s FedWatch tool indicates a high probability of a rate cut [4]. It places the chance of a 25 basis point cut in September at 93% [4]. Expectations for further rate cuts by the end of the year have also increased [4]. There is a 67% chance of another 25 basis point cut in October and over a 50% chance of a further cut in December [4]. The market is largely betting on the Fed to start an easing cycle early, potentially signaling a policy shift at the Jackson Hole Economic Symposium this month [4].

Potential Impact on Interest Rate Strategies

With the anticipation of a rate-cutting cycle, investors are actively exploring hedging and trading strategies related to interest rate changes [4]. The 10-year U.S. Treasury yield futures (10Y) are gaining attention from retail investors due to their small contract size and trading flexibility [4]. CME Group offers various Treasury futures products with different maturities to facilitate diverse spread strategies, allowing traders to express their views on the curve’s slope [4].

Differing Views and Political Pressure

Not all analysts agree with this aggressive timeline. Oxford Economics anticipates the Fed will wait until December to initiate rate cuts, despite rising unemployment [4]. Fed Governor Michelle Bowman has expressed support for three rate cuts in 2025, highlighting the labor market’s vulnerability [6]. Political pressure also plays a role, with the Trump administration advocating for looser monetary policy and considering potential replacements for current Fed Chair Powell [4][5][6].

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federal reserve interest rates