Fed Rate Cut Anticipation Grows Amidst Weakening Jobs Data
Market expectations for a Federal Reserve interest rate cut at the September 16-17 meeting have solidified following a series of disappointing economic indicators. The CME Group’s FedWatch Tool now shows an 87.8% probability of a quarter-point rate cut, with a 12.2% chance of a more aggressive half-point reduction.
The shift in sentiment comes after August’s jobs report showed the economy added only 22,000 jobs, well below the 75,000 expected by economists. This follows July’s already weak performance and represents the latest sign of labor market cooling that has caught the Federal Reserve’s attention.
Additionally, wholesale prices unexpectedly declined 0.1% in August, providing further ammunition for rate cut advocates. White House officials have intensified pressure on Fed Chairman Jerome Powell, with Labor Secretary Lori Chavez-DeRemer stating “Jerome Powell needs to do his job and cut those interest rates now.” President Trump added on Truth Social that “Jerome ‘Too Late’ Powell should have lowered rates long ago.“
But the decision remains complex, as the Fed balances its dual mandate of price stability and maximum employment. Some analysts warn that cutting too aggressively could reignite inflation pressures, particularly with ongoing tariff policies keeping prices elevated.
- Bank of America revised its expectations to include quarter-point cuts in both September and December, marking a significant shift from their previous forecast of no cuts this year.