Markets eye two more rate cuts in 2025

The Federal Reserve delivered its first cut of 2025 on Wednesday, lowering the federal funds rate by a quarter point to 4%–4.25%. Chair Jerome Powell said the move reflected mounting risks in the labor market, even as inflation remains stubborn, the Wall Street Journal reports.

The move quickly resulted in major moves for Kalshi’s markets, where traders rapidly repriced the outlook for the rest of the year.

Before the meeting, contracts on the October Fed decision leaned toward a cut, but left room for a pause. Within minutes of the announcement, the odds of another 25bp reduction jumped to 79%, up five points on the day. Bets on the Fed holding steady dropped to 16%, while a larger move slipped to just 8%.

The repricing underscored that traders see Powell steering a steady course, opting for incremental cuts rather than bolder swings.

The shift was even clearer in the market on the number of 2025 cuts. Odds of exactly three cuts surged to 67%. That marked a swing of more than 20 points from earlier in the week, when “two cuts” was the favored outcome.

Now, just 26% of traders expect only two cuts this year, and only 5% are banking on four.

Inside the Fed, the lone dissent came from Governor Stephen Miran, who was confirmed earlier this week. Miran called for a half-point cut, putting himself at odds with Powell and other more dovish voices on the committee, CNBC reports.

That stance made waves in Kalshi’s market on Fed chair nominees. Miran’s odds spiked nine points to 19%, leaving him nearly tied with Kevin Warsh (20%) and Christopher Waller (19%). Waller, who had previously dissented for smaller cuts, saw his odds fall sharply after siding with the consensus.

A related market on whether President Trump will announce a new chair this year remains at 62%, keeping alive speculation that Powell’s leadership could be tested before his term ends.

Kalshi markets now forecast:

The Fed’s September move was modest, but the market reaction was swift, tilting decisively toward a three-cut cycle through December, while also raising the political stakes for Powell’s tenure.

Sources: Wall Street Journal, Sept. 17, 2025; CNBC, Sept. 17, 2025

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