J.P.Morgan brings forward Fed rate cut forecast to September
The brokerage had earlier forecast one 25 basis point rate cut in December but said in a note on Thursday that the risks now point to an earlier move, followed by three more quarter-point cuts before the Fed pauses.
"For Powell, the risk management considerations at the next meeting may go beyond balancing employment and inflation risks," J.P.Morgan analyst Michael Feroli wrote.
Trump on Thursday nominated Stephen Miran, Chair of the Council of Economic Advisers, to fill a temporary seat on the Fed Board, replacing outgoing Governor Adriana Kugler.
Miran's confirmation before the September 16–17 policy meeting remains uncertain, but JPM said his presence could increase divisions within the rate-setting committee.
The move follows months of Trump pressuring the Fed to cut rates, often clashing with Chair Jerome Powell over keeping policy tight.
"In the off chance Miran is governor by the time of the next meeting, that could imply three dissents. That's a lot of dissents," Feroli said.
The Fed's decision may hinge on August jobs data. JPM said an unemployment rate of 4.4% or higher could justify a larger cut, while a lower reading may prompt resistance from policymakers focused on inflation.
Separately, the JPM note said that Fed Governor Christopher Waller is emerging as the frontrunner to succeed Jerome Powell as Fed Chair, a move it said would likely be welcomed by financial markets.
Analysts at Barclays echoed the sentiment, saying Waller's appointment would reduce uncertainty around how the Fed responds to economic data, which could support longer-dated bonds.
Traders now price in a 91.4% chance of a rate cut in September, compared with 37.7% last week, according to CME Group's FedWatch tool.
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