The latest jobs report for July has revealed a significant increase in the US unemployment rate, rising from 4.1% in June to 4.3%. This development has heightened expectations for a rate cut by the Federal Reserve in September.
Investors are now closely monitoring the potential size of this anticipated rate cut. Prior to the release of the jobs report, it was widely speculated that the Fed would opt for a quarter-point reduction, aligning with the typical incremental adjustments in interest rates. However, following the recent data, the majority of investors are now anticipating a more substantial half-point cut, as indicated by Fed funds futures.
If the Federal Reserve indeed implements a half-point cut, it would signal a heightened level of concern among central bankers regarding the current state of the labor market. This proactive approach suggests that policymakers view the existing risks as significant and are eager to take decisive action to mitigate any further negative impacts.
