Evercore ISI, an investment advisory institution, says the Fed (Federal Reserve) is waiting for the August jobs report data to decide on possible interest rate cuts.
The analysis indicates that, given the slowdown in inflation indicators, the Fed has turned its attention to labor market trends. It points out that labor market conditions will be decisive for the speed and magnitude of interest rate adjustments.
“The era in which small changes in monthly inflation directly influenced interest rate adjustments is over,” said Evercore. “With the Fed now placing a higher priority on employment data than inflation, the extent of rate cuts will depend on the upcoming employment indicators.
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If the labor market data shows significant weakness, the Fed could adopt more aggressive measures, with cuts that could amount to 200 to 250 basis points by the end of the year. On the other hand, if the data exceeds expectations, the Fed could limit itself to just two cuts this year.
Analysts also noted that while July’s CPI was not ideal, it was adequate to mitigate inflation concerns, allowing the Fed to prioritize employment-related risks. Therefore, the August jobs report will be decisive in guiding the Fed’s next moves.
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