The four largest banks in the US are now convinced that the Federal Reserve is about to cut interest rates due to growing fears of a recession.
A Bank of America economist says a Fed rate cut in September is a “virtual lock” after last week’s $6.4 trillion global stock market, Business Times reports.
“The interest rate tide has turned quickly.”
Analysts at Wells Fargo see the Fed cutting by 50 basis points in September and another 50 basis points in November, citing worsening labor market conditions, Investing.com reports.
“The FOMC (Federal Open Market Committee) must quickly return to a ‘neutral’ policy position or risk a vicious cycle of labor market weakness.”
JPMorgan Chase also reportedly thinks two 50 basis point cuts are on the way.
As for Citi’s economists, they also see the Fed cutting 100 basis points by November, with more rate cuts in subsequent meetings, until rates return to the 3% to 3.25% range by mid-2025. reports Bloomberg.
Earlier this month, data from the Bureau of Labor Statistics showed that the unemployment rate rose from 4.1% in June to 4.3% in July, with the number of unemployed Americans rising to 7.2 million.
Weak labor market data has fueled fears of a recession, prompting investors to sell risky assets such as stocks amid doubts whether the Fed could engineer a soft landing.
Over a three-week period, the global stock market witnessed a $6.4 trillion decline in value, with the S&P 500 falling 3% on August 5, posting its worst trading day since 2022.
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