Federal Reserve's Interest Rate Cuts Hinge on August Jobs Report, Evercore ISI Analysts Say
The Federal Reserve's decision on cutting interest rates will be heavily influenced by the upcoming August jobs report, according to experts at Evercore ISI. While recent inflation data has been cooling down, the Fed is now prioritizing labor market trends in its monetary policy decisions.
Evercore ISI stresses that the Fed is now a "labor data-first Fed" rather than an "inflation data-first Fed." This means that the strength or weakness of the job market will determine the pace and magnitude of rate cuts.
If August's labor data shows improvement but continues to soften, Evercore ISI predicts that the Fed will cut rates by 25 basis points at each remaining meeting this year, possibly extending into early 2025. However, if the labor market weakens significantly, the Fed might take more drastic measures.
In the event of a "cracking" labor market, the Fed could implement cuts totaling 200 to 250 basis points by the end of the year. On the other hand, if job market data is stronger than expected, the Fed may only implement two cuts this year.
The analysts also mentioned that the July CPI print was sufficient to alleviate inflation concerns, allowing the Fed to focus more on employment risks. The upcoming August jobs report will play a crucial role in shaping the Fed's future decisions.
In conclusion, the Federal Reserve's interest rate cuts will be heavily influenced by the upcoming August jobs report. Investors should keep a close eye on labor market trends as they will determine the pace and magnitude of rate cuts, which can have a significant impact on the economy and financial markets.