It’s time to cut rates – Rabobank

In Jackson Hole, Fed Chairman Powell gave a clear signal for an interest rate cut in September, notes Rabobank macro analyst Philip Marey.

More reduced fare on the way

“Fed Chairman Powell gave a clear signal for a rate cut in September, but gave no indication of the size of the cut in September or the pace and size of rate cuts after September. The Fed remains data-dependent, but Powell has made it clear that the cutting cycle is about to begin.”

“We expect the labor market to deteriorate further over the rest of the year, leading to four consecutive rate cuts of 25 bps each at the next four scheduled FOMC meetings: September, November, December and January.”

“What happens after January will largely depend on the economic policies of the next administration. A Trump victory would likely lead to a universal tariff and a rebound in inflation that should stop the Fed’s cutting cycle in its tracks. A Harris victory would likely be less inflationary and open up the possibility of further rate cuts in 2025.”