PCE 2.9%, FED Rate Cut Risk 86%: 3 Things Powell Should Note Now

Core PCE 2.9% Sparks 86% Fed Rate Cut Risk: Powell’s Key Choices Now

PCE Inflation July 2025 is slowing, but not fast enough. Markets are strongly betting—an 86% chance of a September rate cut risk, yet Jerome Powell knows one wrong step could either bring back price hike or send Wall Street into panic. 

With Core PCE inflation stuck at 2.9% and a key payrolls report just days away, the question is clear: Will Jerome bow to market pressure, or hold his ground even if trust is shaken?

Inflation Cools, But Core PCE Refuses to Fall: What’s Ahead?

July numbers show headline PCE at 2.6%, right in line with forecasts, while core PCE inflation rose to 2.9%, its highest since February 2025.

Charlie Bilello, chief market strategist, shared a chart confirming this rise, showing how sticky core prices remain. 

Independent sources also point out that both headline and core Personal Consumption Expenditures have stayed between 2–3% for the past year.

This is much lower than the extreme highs of 2022, but still above the federal reserve's 2% price hike target. For U.S. households, it means the cost of living is still heavy. Monetary easing too early could add new price pressures, making the risks even bigger.

Markets Bet on FED Rate Cut Risk 86%, Waller Backs It?

Investors are already acting as if cuts are guaranteed. Federal reserve futures now show an 86.2% chance of a September move, with stocks and bonds adjusting in advance.

But inside the Federal Reserve, things are far from settled. Eric Daugherty of FLVoice News reported that Governor Christopher Waller fed rate cut support is making headlines in the crypto news today. 

He even wanted it in July. Waller believes the delay is “costing us hundreds of billions,” showing his frustration. This puts Powell in a tough spot. If he says no to cuts, it could shake markets—stocks, bonds, and the U.S. dollar might all see chaos. 

If he agrees, it could spark more US inflation target risks and hurt the system's credibility. The rate cut risk is not just financial—it is political too.

Key Points To Consider Before Powell Interest Rate Decision

1. Core PCE Inflation Stubborn at 2.9%

• Prices are cooler than 2022 but still above the Fed’s target.

• A cut now could drive demand and restart inflation.

2. Markets Already Seeing September FED Rate Cut Risk 86% 

• Wall Street strongly expects September easing.

• If Jerome resists, volatility could hit equities, bonds, and currency.

3. Upcoming Payrolls Data Could Shift the Decision

• Strong job numbers would give Powell a reason to wait.

• Weak US payrolls impact will add pressure to monetary easing soon.

In the latest FED news today, adding to the challenge, the Cleveland Fed’s estimated core PCE may climb to 2.96% in August. 

If that happens, the federal reserve could be cutting just as price rises again, which would look like a policy mistake. That makes the future risk even harder to balance.

September Meeting: Ease, Hold, or Powell’s Legacy on the Line

With core PCE inflation at 2.9%, markets expecting an 86% chance of a Fed rate cut, and Waller pushing hard for action, Powell is cornered. He must pick between resisting Wall Street pressure to protect the Federal Reserve's  image—or monetary easing to avoid market turmoil.

In conclusion, the choice will shape U.S. growth in the coming months and could define Jerome’s career. Move too soon, and price hike could heat back up. Wait too long, and markets may break down. 

September’s decision is more than just another general meeting—it is truly Powell’s moment of truth, and the rate cut risk has never been higher.