Challenging Times Ahead: Fed Rate Cuts Incoming

On Friday, BofA Global Research projected that the U.S. Federal Reserve will execute two 25 basis point cuts, one in September and another in December, as a response to a disappointing U.S. jobs report.

Suggesting a significant policy shift, BofA, noted for its previous stance against cuts this year, now foresees these adjustments after data revealed a sharp slowdown in August's job growth and a rise in unemployment to a four-year high of 4.3%. This development seemingly cements the case for imminent rate cuts, shifting the Fed's focus from inflation concerns to labor market weaknesses.

Echoing these sentiments, Morgan Stanley and other leading brokerages like Citigroup expect the Federal Reserve to announce rate cuts at its September meeting. Fed Chair Jerome Powell had already indicated the potential for rate adjustments, tied to burgeoning labor market challenges, while keeping a cautious eye on inflationary pressures.

(With inputs from agencies.)