The likelihood of a Federal Reserve rate cut in September is now seen near 100 per cent after new data showed U.S. inflation increasing at a moderate pace in July and Treasury Secretary Scott Bessent said he thought an aggressive half-point cut was possible given recent weak employment numbers. Traders in contracts tied to the benchmark federal funds rate on Wednesday put the odds of a quarter-percentage point cut at the Fed's September 16-17 meeting at 99.9 per cent, according to estimates calculated by the CME Group's FedWatch tool that followed the release of July Consumer Price Index data on Tuesday and later comments by Bessent noting that the Fed used fears of a weakening job market as justification for a larger cut last September.
Trump has slammed that cut as politically motivated given the proximity to the November presidential election. Bessent rooted his argument in recent Bureau of Labor Statistics revisions showing job growth had slowed to a crawl in May, June and July, though initial estimates for May and June showed stronger employment growth that Fed officials used to argue that the labor market remained in good shape.
"If we'd seen those numbers in May, in June, I suspect we could have had rate cuts in June and July. So that tells me that there's a very good chance of a 50 basis-point rate cut," in September, Bessent said in an interview on Bloomberg television.
Nomura expects the U.S. Federal Reserve to cut interest rates by 25 basis points in September, bringing forward its easing forecast, amid signs of milder U.S. inflation in July and early cracks in the labor market.
The Consumer Price Index rose 0.2 per cent last month, easing from a 0.3 per cent gain in June and broadly in line with economists' expectations, while annual inflation came in slightly below forecasts, according to data released on Tuesday.
The brokerage expects two more 25-bp reductions, in December 2025 and March next year, but said a 50-bp cut next month is unlikely as "The labor market is slowing, but there are few signs of stress, and broader financial conditions remain easy."
The brokerage also lowered its core Personal Consumption Expenditures (PCE) estimate to 0.243 per cent for July, from 0.325 per cent, citing softness in segments such as prescription drugs and software.
Traders, on average, are pricing in 60.4 bps of Fed rate cuts by the end of the year, with a 94.2 per cent probability of a 25-bp reduction in September, according to data from LSEG and the CME Group's FedWatch tool.
Other top brokerages, including J.P.Morgan, Citigroup and Wells Fargo retained their stance, for a September rate cut.
Q1. Who is Treasury Secretary?
A1. Treasury Secretary is Scott Bessent.
Q2. What is full form of PCE?
A2. The full form is PCE is Personal Consumption Expenditures.
Trump has slammed that cut as politically motivated given the proximity to the November presidential election. Bessent rooted his argument in recent Bureau of Labor Statistics revisions showing job growth had slowed to a crawl in May, June and July, though initial estimates for May and June showed stronger employment growth that Fed officials used to argue that the labor market remained in good shape.
"If we'd seen those numbers in May, in June, I suspect we could have had rate cuts in June and July. So that tells me that there's a very good chance of a 50 basis-point rate cut," in September, Bessent said in an interview on Bloomberg television.
Nomura expects the U.S. Federal Reserve to cut interest rates by 25 basis points in September, bringing forward its easing forecast, amid signs of milder U.S. inflation in July and early cracks in the labor market.
The Consumer Price Index rose 0.2 per cent last month, easing from a 0.3 per cent gain in June and broadly in line with economists' expectations, while annual inflation came in slightly below forecasts, according to data released on Tuesday.
The brokerage expects two more 25-bp reductions, in December 2025 and March next year, but said a 50-bp cut next month is unlikely as "The labor market is slowing, but there are few signs of stress, and broader financial conditions remain easy."
The brokerage also lowered its core Personal Consumption Expenditures (PCE) estimate to 0.243 per cent for July, from 0.325 per cent, citing softness in segments such as prescription drugs and software.
Traders, on average, are pricing in 60.4 bps of Fed rate cuts by the end of the year, with a 94.2 per cent probability of a 25-bp reduction in September, according to data from LSEG and the CME Group's FedWatch tool.
Other top brokerages, including J.P.Morgan, Citigroup and Wells Fargo retained their stance, for a September rate cut.
FAQs
Q1. Who is Treasury Secretary?
A1. Treasury Secretary is Scott Bessent.
Q2. What is full form of PCE?
A2. The full form is PCE is Personal Consumption Expenditures.
