At Jackson Hole, Fed Chair Powell gave a clear signal for a rate cut in September, Rabobank’s macro analyst Philip Marey notes.

More rate cut on the way

“Fed Chair Powell gave a clear signal for a rate cut in September, but he did not give any hint about the size of the September cut, or the pace and size of the rate cuts after September. The Fed remains data-dependent, but Powell made clear that the cutting cycle is about to start.”

“We expect the labor market to deteriorate further in the remainder of the year, leading to four consecutive rate cuts of 25 bps each in the upcoming four scheduled FOMC meetings: September, November, December and January.”

“What happens after January will to a large extent depend on the economic policies of the next administration. A Trump victory would likely lead to a universal tariff and a rebound in inflation that should stop the Fed’s cutting cycle in its tracks. A Harris victory would likely be less inflationary and give scope for additional rate cuts in 2025.”