StanChart expects Fed to cut rates by 50 bps in September after weak US jobs data

Standard Chartered expects the U.S. Federal Reserve to cut interest rates by 50 basis points at its policy meeting this month, against its previous forecast of 25 bps reduction, after weak August jobs data on Friday signaled a cooling labor market.

In a client note on Friday, the brokerage said the labour market had gone "from solid to soft in less than six weeks," with non-farm payrolls rising just 22,000 in August, far below the 75,000 expected. The unemployment rate rose to 4.3%, breaking out of its 15-month range.

"We think the August labour-market data has opened the door to a 'catch-up' 50bps rate cut at the September FOMC meeting, just as it did this time last year," the note said.


Bank of America also revised its outlook on Friday, now expecting two 25 bps cuts in September and December, after previously forecasting no cuts this year.

StanChart said it does not expect further cuts beyond September, citing "sticky inflation and fiscal easing" as likely constraints.