A Fed rate cut in September is increasingly considered a strong possibility. JPMorgan announced that it expects the Fed to cut interest rates by 25 basis points at its September meeting, despite uncertainties surrounding inflation data.
The bank forecasts the August Consumer Price Index (CPI) to remain at 2.9% year-over-year, and the core CPI at 3.1%. However, it noted that higher-than-expected inflation data could lead to a rate cut being postponed until October or December.
JPMorgan also highlighted the potential market impact of inflation data. According to the bank, a core CPI reading above 0.40% could lead to a 1.5–2% decline in the S&P 500, while a reading between 0.35% and 0.40% could lead to a 0.5–1% loss. A reading below 0.25% could lead to a 1.25–1.75% gain in the index.
JPMorgan CEO Jamie Dimon also pointed out the weakening economy, saying, “I think the Fed will probably cut interest rates, but I don’t think it will be a direct result of developments in the economy.”
Meanwhile, Fitch Ratings argued that the slowdown in the US economy is becoming increasingly evident. The agency noted that the weakening labor market could force the Fed to cut interest rates more rapidly. Fitch expects 25 basis point cuts in the US in September and December, and projects three additional cuts in 2026.
Fitch also noted that the probability of a new interest rate cut by the European Central Bank (ECB) is low, and therefore the dollar’s chances of recovery remain limited.
*This is not investment advice.