Fed Poised for Major Rate Cut Amid Weakening Jobs Data The upcoming August jobs report is expected to confirm the labour market's softening, echoing July's weakness. Economists at Citi foresee this data driving the Federal Reserve toward a significant rate cut in September. As economic uncertainty grows, a 50 bp cut is gaining traction as the preferred option.
July’s Labor Market Slump Likely Signals Deeper Issues The July jobs report showed troubling signs, with weaker labour demand across various sectors. Citi economists argue this wasn't a fluke but the beginning of a broader downturn. The August report is expected to solidify concerns, pushing the Fed toward a more aggressive policy response.
Economists Predict a Jumbo Rate Cut to Prevent Recession As the Fed prepares for its September meeting, the debate intensifies over the size of the anticipated rate cut. With the labour market weakening, a 50 bp cut is seen as necessary to stave off a potential recession. Citi forecasts a modest job growth of 125,000 in August, emphasising the need for decisive action.
Unemployment Steady, but Concerns Remain Despite a stable unemployment rate at 4.3%, Citi warns this might not be enough to ease the Fed’s concerns. Even a slight dip in unemployment won't erase the underlying issues. The August report is expected to reinforce fears of continued softening, setting the stage for a significant rate cut.
Sectoral Weakness Adds Pressure on Fed Ongoing weakness in key sectors like construction, government, and manufacturing is likely to impact the August jobs report. Citi highlights these trends as critical factors that will influence the Fed’s decision. A sustained slowdown in these areas adds weight to the argument for a larger rate cut.
Fed Faces Tough Decision Ahead of September Blackout With the August jobs report arriving just before the Fed's blackout period, it will play a crucial role in shaping the September rate cut decision. Citi expects this data to heavily sway the Fed towards a 50 bp cut, marking the beginning of an easing cycle aimed at preventing further economic downturn.
Market Braces for Fed’s Next Move As the August jobs report looms, markets are bracing for the Fed’s response. The growing consensus is leaning towards a 50 bp cut, as the labour market shows signs of genuine weakening. The coming weeks will be pivotal in determining the Fed’s approach to steering the economy away from a potential recession.