A 50bp rate cut in September remains the baseline scenario at Citi By Investing.com

Investing.com — Citi analysts said in a note on Wednesday that a 50 basis point (bp) rate cut at the upcoming Federal Open Market Committee (FOMC) meeting in September remains their base case scenario.

July’s FOMC minutes provided the clearest indication yet that the Federal Reserve is leaning toward easing policy, with the “vast majority” of officials seeing such a move as appropriate.

The minutes confirm that many officials were inclined to cut rates even before the recent weaker economic data emerged.

A “large majority” of Fed officials indicated that if the data continues to meet expectations, it would likely be appropriate to ease policy at the September meeting.

Citi analysts noted that this sentiment existed before the release of weaker inflation and employment data, which likely strengthened the case for a rate cut.

Citi analysts signaled that “several” officials at the July meeting saw a “plausible case” for cutting the target range by 25bps at that time.

“Several officials reportedly backed a cut in July, with several noting risks of more significant damage to the labor market,” analysts said.

“With the unemployment rate rising from 4.1 percent to 4.3 percent, these officials’ concerns will only be heightened,” they added.

The minutes also revealed that “some” officials noted increased risks of further deterioration in the labor market as conditions eased.

With the unemployment rate rising, these concerns may have deepened, further supporting the case for a more significant rate cut in September.