Analysts have revised their outlook on a rate cut, citing signs of weakness in the labor market and uncertainty surrounding President Donald Trump’s latest nominee to the Fed.
JPMorgan reportedly expects the U.S. Federal Reserve to lower interest rates by 25 basis points in September, compared with its earlier forecast of a rate cut in December.
According to a Reuters report, the analysts at JP Morgan have changed their outlook about a rate cut by the Federal Reserve, flagging signs of weakness in the labor market and uncertainty around President Donald Trump’s latest Fed nomination.
The brokerage reportedly said that risks now point to an earlier move, followed by three more quarter-point cuts before the Fed pauses.
The updated forecast comes after U.S. President Donald Trump named Stephen Miran, Chair of the Council of Economic Advisers, to fill a temporary seat on the Fed Board, as a replacement for outgoing Governor Adriana Kugler.
“For [Jerome] Powell, the risk management considerations at the next meeting may go beyond balancing employment and inflation risks,” JPMorgan analyst Michael Feroli wrote, as per Reuters.
Trump has frequently clashed with Powell over the Fed Chair’s reluctance to cut interest rates. Powell has defended Fed policymakers by noting that the U.S. central bank needs more time to ascertain economic trends correctly.
The E-mini S&P 500 Index Futures were up 0.2% in premarket trading. Retail sentiment on Stocktwits about the SPDR S&P 500 ETF Trust was in the ‘bullish’ territory at the time of writing.
While it’s not certain that Miran will be confirmed before the Fed’s September 16–17 policy meeting, JPM said his presence could increase divisions within the rate-setting committee.
“In the off chance Miran is governor by the time of the next meeting, that could imply three dissents. That’s a lot of dissents,” Feroli reportedly said.
According to CME Group’s FedWatch tool, Traders have priced in a 91.4% chance of a rate cut in September, compared with 37.7% last week.
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