During the June Federal Open Market Committee (FOMC) meeting, there was a suggestion to postpone the start of rate cuts until the end of the year. However, Chairman Powell acknowledged that the labour market is gradually stabilising. We believe that a rate cut is being considered to be implemented during the September meeting. Based on the expectation that core inflation will settle at an annual rate of 2-3% after June, we anticipate that the Federal Reserve (FRB) will assess that inflation is returning to the target of 2% by the September meeting.
Although there has been a significant increase in employment, the supply and demand conditions in the labour market are actually moderating. Given that the unemployment rate is likely to rise in the future, we expect that the FRB will actively explore the possibility of an early rate cut to address the weaker labour market conditions.
Full article: pdf AMO Insight 'The Federal Reserve is Expected to Implement an Early Rate Cut'
Written by Murakami Naoki, Senior Economist, Asset Management One Co. Ltd