The four largest banks in the US now believe the Federal Reserve is about to cut interest rates amid rising recession fears.
A Bank of America economist says a September Fed rate cut is a “virtual lock” following last week’s $6.4 trillion global stock market rout, reports Business Times.
“The rate tide has quickly turned.”
Analysts at Wells Fargo see the Fed cutting 50 bps in September and another 50 bps in November, citing deteriorating conditions in the labor market, reports Investing.com.
“The FOMC (Federal Open Market Committee) needs to get back to a ‘neutral’ stance of policy quickly or else it risks a vicious circle of labor market weakness.”
JPMorgan Chase also reportedly believes two 50 bps cuts are incoming.
As for Citi economists, they also see the Fed cutting 100 bps by November with more rate cuts in the subsequent meetings until interest rates rest in the 3% to 3.25% range by mid-2025, reports Bloomberg.
Earlier this month, data from the Bureau of Labor Statistics showed that unemployment rose from 4.1% in June to 4.3% in July, with the number of jobless Americans soaring to 7.2 million.
The weak job market data has stoked fears of recession, driving investors to sell off risk assets like stocks amid doubts that the Fed will be able to engineer a soft landing.
Over a three-week period, the global stock market witnessed a $6.4 trillion wipeout with the S&P 500 dropping by 3% on August 5th to record its worst trading day since 2022.
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