Standard Chartered: Fed could cut rates by 0.5% next week
The bank changed its earlier forecast following August’s weak employment report. Traders still largely expect a smaller 0.25% rate cut.
Standard Chartered now expects the Federal Reserve to cut rates by 0.5% next week. Earlier, the bank projected a 0.25%, but the August report showed weaker hiring and unemployment at 4.3% – the highest since 2021. In a client note, the bank called this a potential “catch‑up” move and said preliminary payroll revisions for April 2024–March 2025, due next week, could support the larger cut.
Markets remain less aggressive. The CME FedWatch tool shows roughly 90% odds of a 0.25% cut and 10% for 0.5%. Standard Chartered also says that sticky inflation and fiscal easing could limit the pace of any cuts after September.
Wall Street is split. Morgan Stanley and Deutsche Bank don’t view the August data as weak enough for a half‑point cut now, though they say back‑to‑back reductions are possible. Barclays expects 0.25% at each of the remaining meetings this year. Macquarie brought forward its expected December cut to October. Bank of America now sees 0.25% cuts in September and December after previously calling for no moves this year.
For markets, a bigger first step would ease financial conditions more quickly – usually a positive for risk assets – but the path after September may be shallower if inflation stays a concern. Near‑term, watch the payroll revisions and the Fed’s rate projections next week to see if they align with Standard Chartered’s forecast.
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