Fed cuts the policy rate at the September meeting

The disinflation path has done most of the work the committee needed. Core PCE has printed under a 0.2% monthly pace for three consecutive readings, which annualizes inside the target band. The committee has historically eased once trailing three-month core momentum falls below 2.5% annualized while the unemployment rate is drifting up, and both conditions now hold.

Labor is the swing factor and it is loosening in the right way for a cut. Payroll revisions have been negative for four straight months and the quits rate has rolled back to its pre-2021 level, signaling wage pressure is fading without a disorderly break in employment. That is precisely the soft-landing texture that lets the committee move pre-emptively rather than wait for damage.

Communication has already pre-committed the market. Dot-plot dispersion narrowed at the last meeting and the chair's testimony leaned explicitly on 'risk management.' When the leadership pre-frames a move and front-end pricing agrees, the historical follow-through rate exceeds 90%. The remaining 20 points of gap to fair value is being held open by tail-risk hedgers, not by anyone with a real view that they hold.