JPMorgan analysts expect the U.S. Federal Reserve to lower interest rates by 25 basis points at its meeting next week, citing weaker labor market data and signs of easing inflation. The anticipated move would mark the beginning of a more accommodative policy cycle after years of restrictive rates.
Why JPMorgan Expects a Cut
- Slowing Jobs Growth: August payroll figures came in far below forecasts, pointing to a softening labor market.
- Inflation Moderation: While still above the Fed’s 2% target, recent data show slowing rent costs and energy price stabilization, giving policymakers more flexibility to ease.
- Market Expectations: Traders are already betting on multiple rate cuts through 2025, with cumulative reductions potentially reaching 125–150 basis points by late 2026.
Risks and Market Implications
- Possible Sell-Off: JPMorgan warns that while markets have largely priced in the move, a rate cut could still trigger a “sell-the-news” reaction if investor expectations are too optimistic.
- Bond Market Signals: Treasury yields have already declined, reflecting bets that the Fed will begin loosening policy.
Looking Ahead
If the Fed delivers the expected cut next week, it would mark the first step in a gradual shift toward looser monetary conditions. Investors will be watching closely for updates in the Fed’s economic projections, which could provide insight into how aggressive future cuts may be.
