Economists at Nomura Holdings Inc now forecast the US Federal Reserve (Fed) will begin cutting interest rates in September as the labour market weakens and inflation presents less risk.
The Fed will likely ease policy at the September meeting by 25 basis points, followed by two more cuts in December and March, the Nomura economists wrote in a note.
While the median estimate of analysts called for a 25-basis-point cut in the next three months, economists had been divided on the timing. Nomura was among those that didn’t expect officials to ease policy until later in the year.
Markets are also pricing in Fed moves, baking in a September cut and positioning for another reduction in December, according to world interest rate probability data.
Consumer price data Tuesday showed a core reading increased 0.3% in July, in-line with economist expectations. Tariff-related categories rose at a tame pace, encouraging markets that the levies wouldn’t pose an outsize inflationary risk.
The labour market, meanwhile, has shown signs of slowing, with revisions showing the past three months notched the weakest pace of monthly job creation since the pandemic.
Following the consumer price index report, some investors even began pricing in outsize Fed rate cuts, seeing prospects for a 50-basis-point move in September. Treasury Secretary Scott Bessent suggested just such a move should be considered in an interview on Fox Business.
Source: theedgemalaysia