By Investing.com — The Federal Reserve could react to the latest nonfarm payrolls figures by rolling out 125 basis points in cut at its three remaining monetary policy gatherings this year, according to analysts at Citi.
In a note to clients, the analysts said that they would “not be surprised” if the Fed slashed rates by 25 basis points at its two-day meeting on Sept. 17-18, followed by two 50-basis point reductions in November and December.
“In either case, we expect 125 basis points of cuts over the remainder of the year, slightly more than the about 110 basis points priced,” the analysts said.
The comments come as investors are now all but certain that the Fed will bring borrowing costs down from a 23-year high of 5.25% to 5.5% following a weaker-than-anticipated jobs report on Friday. The data showed that the US economy added 142,000 last month, up from a heavily downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, an uptick from the initial July mark of 114,000.
Friday’s release also showed the US unemployment rate at 4.2%, compared to July’s figure of 4.3%. The level was in line with estimates.
Separate data points leading up to the Labor Department’s report also found that US private employers hired the fewest number of workers since 2021 in August, while job openings dipped to a 3-1/2-year low in July.
“Job growth has slowed to rates usually seen only around recessions and suggests the unemployment rate will continue to rise – and likely will accelerate higher,” the Citi analysts argued.
Investors’ bets that the Fed will bring down rates by 25-basis points stood at 73% on Monday morning, according to the CME Group’s (NASDAQ:CME) closely-monitored FedWatch Tool. Meanwhile, the probability of a 50-basis point cut stood at 27% after briefly jumping above 50% in the immediate wake of the jobs data.
On Friday, Fed Governor Christopher Waller said “the time has come” for the Fed to decrease rates, but he remained open-minded about the depth and pace of the cuts.
