25bps Rate Cut Widely Expected, But Prediction Markets Now Focus on Powell's Press Conference Words

The Federal Reserve's September interest rate decision appears to be a foregone conclusion, with overwhelming market consensus pointing toward a 25 basis point cut.

The CME FedWatch tool shows 96% probability assigned to a quarter-point reduction and only 4% expecting a more aggressive 50 basis point cut. The chance of rates remaining unchanged has dropped to zero, indicating that markets view some form of easing as inevitable.

This consensus extends across major prediction markets.

Polymarket, one of the largest decentralized prediction platforms, shows similar odds with 92% of participants betting on a 25 basis point decrease, while only 6% expect a half-point cut and 2% anticipate no change. The market has attracted significant attention, generating $184.3 million in trading volume.

Kalshi, another prominent prediction market, mirrors these expectations with 92% of traders backing a 25 basis point cut, 7% anticipating a larger reduction of more than 25 basis points, and just 3% expecting rates to remain steady. The platform has recorded $74.5 million in volume.

Even smaller platforms like Limitless show remarkably consistent sentiment, with 95.45% probability for a quarter-point cut, 4.5% for a half-point reduction, and only 1.65% for no change, though with a more modest $199,300 in trading volume.

Markets Bet on Powell’s Phrases Ahead of Fed Press Conference

However, with the rate decision itself appearing settled, the real action in prediction markets has shifted to an entirely different type of speculation: what Federal Reserve Chair Jerome Powell will say during his 2.30 PM (ET) press conference.

The press conference has become a critical component of Federal Reserve communications, often providing as much market-moving information as the rate decision itself. Powell's choice of words, tone, and emphasis can significantly influence how markets interpret the central bank's future policy direction. Traders and analysts have learned that subtle linguistic shifts can signal important changes in the Fed's thinking, making these events a rich ground for prediction market activity.

On Polymarket, traders are betting on whether Powell will use specific phrases during his remarks. The platform shows an overwhelming 97% probability that Powell will begin his prepared remarks with "Good afternoon," and also, a 97% probability that he will reference the "median" in his speech.

Kalshi takes a different approach, offering traders a broader range of potential words and phrases that Powell might employ during the conference.

Why Powell’s Words Matter More Than the Cut

The September press conference carries particular significance given the overwhelming market expectations for a rate cut and the context of the Fed's ongoing monetary policy recalibration that began with their 50 basis point cut in September 2024.

How Powell frames any decision, whether as a continuation of the normalization process, a response to changing economic conditions, or part of a broader easing trajectory, will likely influence market expectations for future meetings and provide important context for understanding the Fed's current policy stance.