Anticipated Swing: Fed’s Potential Rate Cut Adjustment for September

Standard Chartered has predicted a substantial 50-basis-point reduction in U.S. interest rates at the forthcoming Federal Reserve policy meeting. The forecast, a departure from the previously expected 25-basis-point cut, comes in response to weaker job growth and a rising unemployment rate in August, indicating a cooling labor market.

In their recent client note, Standard Chartered highlights the abrupt shift in the U.S. labor market from solid to soft within weeks, advocating a significant rate cut in September. However, other financial institutions, including Morgan Stanley and Deutsche Bank, remain skeptical, suggesting the jobs report might not yet justify such a large reduction.

With varying forecasts, financial analysts highlight the uncertainty surrounding the Federal Reserve's next move. While Barclays and Bank of America anticipate modest reductions, markets currently show a 90% likelihood of a 25-basis-point cut next week, with a lesser chance for a more pronounced cut.

(With inputs from agencies.)