Since the release of the minutes of the Federal Reserve's July meeting, the September interest rate cut seems to have been "set in stone". As for the magnitude, BlackRock, the world's largest asset management institution, has called for the Federal Reserve to kick off the "first cut" with a significant interest rate cut.
Rick Rieder, Chief Investment Officer of BlackRock's Global Fixed Income Division, stated on Wednesday that the Federal Reserve needs to significantly lower interest rates at its September meeting to reignite economic growth and alleviate consumer debt pressure.
I think we will cut interest rates by 50 basis points, "he said.
Earlier this month, the unexpectedly weak employment report released by the United States in July shocked the market. This data has raised new concerns about an economic recession, with Wall Street leaders calling on the Federal Reserve to relax policies at a more aggressive pace. The report released by the US Bureau of Labor Statistics on Wednesday is even more shocking.
The report shows that in the year ending in March this year, employment growth in the United States may not be as strong as previously reported. The preliminary benchmark revision by the US Bureau of Labor Statistics shows that non farm employment during the aforementioned period may decrease by 818000 people, proportionally equivalent to a monthly decrease of about 68000 people. The specific monthly revisions will not be officially announced until February 2025.
The revised data shows that the actual employment growth of the US economy is much weaker than initially reported. This revision may change expectations for economic growth. The job market has always been one of the key indicators for measuring the health of the economy. If employment growth is not as strong as expected, it may indicate an increased risk of slowing economic activity.
Rieder commented that this initial correction helps confirm some concerns about the sluggish job market in recent months. This latest report ultimately emphasizes the importance of the labor component in the Federal Reserve's dual mission and indicates that the federal funds rate is too restrictive in the face of slowing inflation and economic slowdown.
Nevertheless, he still expects that the Federal Reserve may ultimately cut interest rates by 25 basis points at a series of meetings before 2025.
But he emphasized that the Fed's actions would prolong the pressure he sees in the vast amount of data.
I saw credit card defaults or write offs, car loan defaults yesterday, just like you're starting to see numbers approaching a financial crisis. We haven't reached that point yet, but you're starting to see this significant growth, "he added.
Goldman Sachs Chief Economist Jan Hatzius previously stated, "The reduced risk of economic recession has strengthened our forecast that the Federal Reserve will only cut interest rates by 25 basis points at its September meeting
Hatzius added that he expects to cut interest rates by 75 basis points this year, with the last cut in December.
In summary, it can be affirmed that as the end of the year approaches, the US economy paints a mixed picture for investors. This is essentially equivalent to the uncertainty of the Federal Reserve's policy direction, which may be reflected in this week's Jackson Hole Global Central Bank Year.