Rate Cut 2025

Fri. Aug. 22, 2025 – POWELL PIVOTS TO RATE CUTS

Fed Chairman Jay Powell opened the door to cutting rates in September. Powell was more dovish this morning, making it explicit that he does not want the labor market to weaken. Powell also adopted the view that tariffs could raise prices, yet that is likely to be short-lived and slow growth (i.e., Waller). Still, Powell did not fully pound the table on rate cuts largely because he sees the inflationary effects from circulating tariffs and urged caution. The odds of a Fed rate cut jumped from 60 to nearly 100 percent with stocks recovering half of their losses from this week.

update August 26th – The fed-funds futures market (see chart above) was pricing in one and a third of cuts of a one-quarter percentage point each by year end, but After a dovish Jackson hole, nearly 2 rate cuts are priced, and 5.5 for the end of 2026, or -133 bps. We are updating our Inflation (now rate cuts denominated) fractal to study the impact of the (1) jackson Hole on stocks/ sectors. Here is a basket of stocks specifically benifitting from a coming rate cut on the rigght hand chart. Crossing that fracal with our best quantitative grades and in a regime like Summer with the EPS grade, the first ten names could be considered in our quantamental longs if we can buy them at the right price, like Eaton (ETN US), or FCX. META, AVGO, JPM, COF are already part of our US quantamental longs.

The Fed’s latest Summary of Economic Projections made the growing cracks even clearer. While the median forecast still shows two rate cuts this year, policymakers are split. Seven of the 12 voting members on the Federal Open Market Committee see no rate cuts at all. A handful want to move faster. And two of the loudest voices pushing for action, Vice Chair for Supervision Michelle Bowman and Gov. Christopher Waller, are Trump appointees. Waller’s name is being floated as a potential replacement for Powell when his term ends next spring.

First Basket :