Federal Reserve Chairman Powell held a press conference after the Federal Reserve’s policy decision to keep interest rates unchanged on September 20, 2023 in Washington, the United States.
Evelyn Hochstein | Reuters
As investors await the Federal Reserve’s upcoming interest rate decision this month, Carl Weinberg of High Frequency Economics said a significant rate cut is unlikely.
Federal Reserve policymakers are generally expected The interest rate cuts began at the meeting held on September 17 and 18, marking a shift in policy tightening after the epidemic. Stirring fears of U.S. recession.
“We don’t see anything in the data that I can imagine that would prompt the Fed to do what I would call a panic cut of 50 basis points,” Weinberg, chief economist at HighFrequency Economics, told CNBC.Squawk Box Asia,” adding that the economy will see a 25 basis point interest rate cut.
He acknowledged that the latest initial jobless claims were down despite a slowdown in hiring.
U.S. labor market data on Thursday Provides mixed signals about economic conditions There are concerns the Fed will keep its higher rating longer than necessary.
Private sector employment growth was the slowest since 2021, raising concerns about a sharp slowdown in the labor market. On the other hand, weekly jobless claims fell from the previous week.
“I think for the Fed to raise interest rates by 50 basis points, the first thing is a significant increase in unemployment insurance claims, evidence of more layoffs in the economy, and a sharp decline in hiring, perhaps to zero,” Weinberg said. .
He observed that real interest rates rose while inflation fell. “The Fed has to take action on this, but it doesn’t have to hit the panic button and cut interest rates by 50 basis points,” Weinberg said.
The Fed’s benchmark borrowing rate, currently between 5.25% and 5.50%, affects most other rates consumers pay.
Other market observers believe that a 50 basis point rate cut is not completely impossible, especially in Wall Street braces for one of most important economic releases Later in the day – the August jobs report.
“A looser, softer job market allows the Fed to remove constraints on policy rates, which could be as high as 50 basis points,” said Ben Emons, founder of Fed Watch Advisors. He added that the momentum in the labor data is “deflating.” .
Nonfarm employment is expected to increase by 161,000 The unemployment rate is expected to fall to 4.2% in August, according to Dow Jones. That said, recent data, including significant downward revisions to previous data job growth numberssignaling a sharp slowdown in hiring, bringing some downside risk to this forecast.
Emmons said that while the non-farm payrolls data may be positive, it is still likely to be below the “low” number of 100,000.
“Soft print (<100K) is negative for risk sentiment as the market will price in labor market weakness rather than labor market easing in a scenario where growth fears turn to recession fears," he wrote in a note on Friday. .
“Assume the (later) data triggers a downside scenario for the job market. In this case, the Fed will respond more quickly, which could ultimately consolidate the S&P 500 near its 200-day moving average or slightly below The next major bottom is at the 200-day moving average,” he said.
—CNBC’s Jeff Cox contributed to this report.
