Quarterly boost for Bechtle, Munich faces renewed strain
Fed Rate Cut in September 2025 Highly Anticipated
In the financial world, there is a growing expectation that the Federal Reserve will cut interest rates in September 2025. According to various sources, the probabilities of a rate cut range from approximately 85% to over 96%. The most commonly expected size of the cut is a 25 basis point (0.25%) reduction, although some discussions suggest a larger half-point (0.50%) cut might be on the table depending on upcoming economic data.
The Federal Open Market Committee (FOMC) recently kept rates steady at 4.25%-4.50%, but two members dissented, voting for a quarter-point cut at the July meeting. This suggests the Fed is preparing for a cut soon.
The labor market has shown signs of weakness. July added only 73,000 jobs versus an expected 100,000, and downward revisions for May and June payrolls totaled 258,000. The unemployment rate ticked up to 4.2% from 4.1% in June. This weakening labor demand has caused investors to recalibrate rate cut likelihood upward.
Inflation, while still somewhat persistent, showed a cooler July reading, contributing to high market confidence for a September cut. However, some analysts note inflation in sticky service sectors may restrain the Fed from deep cuts just yet, highlighting the importance of forthcoming data.
If a rate cut does occur, the federal funds rate could lower to around 4.00%-4.25% or possibly as low as 3.75%-4.00% if more cuts follow in October and December. Rate cuts could ease financial conditions, potentially supporting slower but steady economic growth amid a moderated expansion pace seen in the first half of 2025.
However, financial markets might respond positively in the short term due to expectations of easier monetary policy, but risks remain if inflation does not decline in line with the Fed’s 2% target, potentially complicating the timing and size of future cuts.
Meanwhile, in the European market, Bechtle gained 11.9% to 41.28 euros by midday on Friday. DZ Bank recommends buying Munich Re's stock with a price target of 640 euros, while Jefferies analysts rate Bechtle as a 'buy' with a price target of 48 euros. Munich Re left its annual profit target at 6 billion euros and increased its first-half profit to 3.2 billion euros. The German benchmark index, Dax, fell by 0.1% by midday, but the index has gained more than 3% in the past week. The euro remained virtually unchanged against the dollar at 1.1638.
In other news, UBS analysts have reaffirmed their 'buy' recommendation for Rheinmetall with a price target of 2,200 euros. Rate cut expectations are gaining momentum for the Fed as early as September. According to Greil, the new US import tariffs are likely to be passed on to consumers and may gain momentum in August. On the bond market, the benchmark Bund future was at 130.12%, close to the previous day's level. The all-time high of 24,639 points for the Dax is now within reach.
References:
- Fed Rate Cut in September 2025: What to Expect
- Fed Rate Cut Probabilities Rise Amid Weak Labor Market
- Inflation Data Boosts Expectations for September Rate Cut
- What a September Rate Cut Could Mean for the Economy
- Fed Rate Cut Odds: What Investors Need to Know
- Anticipation for a possible Federal Reserve interest rate cut in September 2025 is increasing in the business and finance sector, prompted by a probability range of 85% to over 96%.
- The recent labor market data showing signs of weakness and increased inflation concerns have intensified the debate among investors on the potential size of the Federal Reserve's planned rate cut, with discussions revolving around a 25 basis point or possibly a larger half-point cut.
- The upcoming economic data will greatly influence the size of the expected Federal Reserve rate cut in September 2025, as the central bank may choose to limit any significant cuts due to the possible restraining effects of persistently high inflation in service sectors.
