Fed Likely to Cut Interest Rates at Measured Pace This Year, Oppenheimer Says

01:28 PM EDT, 09/08/2025 (MT Newswires) -- The Federal Reserve will likely embark on a series of rate cuts this month, with the central bank unlikely to adopt an aggressive approach to monetary policy easing, Oppenheimer Asset Management said in a Monday note.

The US central bank's Federal Open Market Committee is scheduled to review its policy next week, and has two more meetings after that this year.

The odds of a 25-basis-point rate cut on Sept. 17 were at 88% on Monday, while Fed funds futures priced in a nearly 12% chance for a reduction by half a percentage point, according to the CME FedWatch tool.

"We do not expect any dramatic cuts from the Fed but rather measured trims that exemplify its sensitivity to practicing its dual mandate to nurture economic growth toward full employment without untoward levels of inflation," Oppenheimer Chief Investment Strategist John Stoltzfus said.

A soft jobs report released Friday stoked fears about a slowing labor market, triggering some market participants to bet on a bigger rate cut at this month's meeting. Total nonfarm payrolls rose by 22,000 last month, the Bureau of Labor Statistics reported, well short of a 75,000 increase expected in a survey compiled by Bloomberg.

Friday's payrolls miss not only solidified views about the Fed cutting rates by at least 25 basis points at its upcoming meeting, but "perhaps even two more times before the end of the year," Stoltzfus said.

This week, investors' focus will be on the producer price index for August on Wednesday, followed by consumer inflation data due out on Thursday.

"Even if inflation continues to remain sticky or trends slightly higher, we believe the Fed is now more focused on softness in the labor market as it shifts the balance of its dual mandate to maintaining full employment," Stoltzfus said.

Last month, Fed Chair Jerome Powell indicated a potential monetary policy pivot, saying that downside risks to employment were rising, while the effects of tariffs on inflation will likely be short lived.

"Our intermediate- and longer-term outlook for the US economy and the stock market remains decidedly bullish," Stoltzfus said. "As the drag of tight monetary policy eases, job growth and consumption and business fixed investment demand should continue to exhibit resilience."

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