Barclays: It is unlikely that the Fed will cut 50 basis points in September

The data from Jin Shi on August 4th, Barclays said that we now expect the FOMC of the Federal Reserve to cut interest rates three times in September, November, and December this year, each time by 25 basis points. We assume that the labor market will show sustained resilience in the August report, and the unemployment rate will stop rising. Based on this assumption, we currently believe that a 50 basis point rate cut in September is unreasonable. However, if the unemployment rate continues to rise, it will trigger concerns about the labor market cooling faster than expected. Looking ahead to 2025, we expect the unemployment rate to gradually decline to 4.2%, and the inflation forecast to remain unchanged. We continue to expect the FOMC to cut interest rates three times in March, June, and September next year, and we expect concerns about a lack of further progress in inflation in the second half of 2025 to lead the FOMC to pause interest rate cuts after the federal funds Intrerest Rate reaches the range of 3.75-4.00%. In the long run, we continue to believe that the neutral Intrerest Rate level is around 3.00-3.25%.