Barclays: The Federal Reserve is unlikely to cut interest rates by 50 basis points in September.
On August 4th, Barclays, the second-largest bank in the UK, stated that they now expect the US Federal Reserve's FOMC to cut interest rates three times this year, in September, November, and December, each by 25 basis points.
Assuming the labor market will show continued resilience in the August report, the unemployment rate is expected to stop rising. Based on this assumption, a 50 basis point rate cut in September is currently considered unreasonable. However, if the unemployment rate rises further, it will raise concerns that the cooling of the labor market is faster than expected.
Looking ahead to 2025, the unemployment rate is expected to gradually decline to 4.2%, and the inflation forecast is expected to remain unchanged. It continues to be expected that the FOMC will cut rates three times next year, in March, June, and September, and it is expected that concerns about a lack of further progress in inflation in the second half of 2025 will lead the FOMC to pause its rate-cutting actions after the federal funds rate range reaches 3.75-4.00%. In the long run, it continues to be believed that the neutral interest rate level is around 3.00-3.25%.
