The upcoming September 16-17 Federal Open Market Committee (FOMC) meeting will likely start the next cycle of rate cuts, although Standard Chartered predicts that the central bank will cut by 50 bps instead of 25 bps due to a weak labor market and falling inflation.
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“August labor market data has paved the way for a ‘catch-up’ 50 basis point rate cut at the September FOMC meeting, similar to what occurred at this time last year,” the bank said.
Labor Market Slows as 25 Bps Cut Remains Likely Outcome
The labor market has shown signs of cracking, as August’s nonfarm payrolls showed 22,000 job additions compared to the estimate of 75,000. In addition, the Bureau of Labor Statistics (BLS) revised job additions for the year ended March by a record high of 911,000.
On the other end are Morgan Stanley (MS) and Deutsche Bank (DB), which don’t believe that the labor market statistics warrant a 50 bps cut. CME’s FedWatch tool sides with them, showing odds of 96% for a 25 bps cut and just 6% for a 50 bps cut.
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