Federal Reserve
“The time to support the labor market is when it’s strong, and not when you begin to see layoffs.”
We will be hoping for two things at the September meeting this week: a 50 bps cut and minimal upwards revisions to the unemployment rate projections in the Summary of Economic Projections (SEP).
Our new baseline is a 50 bps cut with a total of 75 bps of cuts in the SEP for 2024. It’s a close call but we think a 50 bps cut is more likely than a 25 bps cut. We think a 50 bps point cut is the right move.
It's the last week of Fedspeak before the blackout period for the September meeting. Everyone speaking this week is on board with Powell's assessment that the labor market is at least balanced.
Even though today’s report gave back some of the weakness in the July household survey, the reversion was slight. The August report meets the conditions we laid out yesterday for a 50 bps cut in September to play catch-up.
We see two individually sufficient conditions for the Fed to proceed with a frontloaded interest rate cut in September above 25 basis points: either (1) the unemployment rate is 4.2% or above, or (2) the prime-age 25-54 employment rate declines in both month-over-month and year-over-year terms. Back when we
A quiet week after Jackson Hole. What we did hear this past week showed that Powell has some convincing to do on the Committee.
Almost as notable as the things Powell said were the things he did not. Between now and September, Fedspeak should focus on keeping the Committee’s options open to a 50 bps cut in September.
Powell's Jackson Hole speech made clear that rate cuts will begin in September. Most notable what he did not say: "gradual." Powell is keeping the door open to a larger cut in September.
