According to predictions from Wall Street institutions including JPMorgan Chase and Bank of America, the Federal Reserve is unlikely to make a significant rate cut at its November meeting.
Following the release of labor market data on Friday (October 4) showing signs of economic recovery in the United States, Wall Street has abandoned expectations of a 50 basis point rate cut.
Both Chief U.S. Economist Michael Feroli and Bank of America economist Aditya Bhave pointed out that Friday’s employment report was the reason for their revised expectations of the Fed’s monetary policy path.
The U.S. Bureau of Labor Statistics reported on Friday that non-farm payrolls increased by 254,000 in September, far exceeding the expected 150,000 and surpassing the expectations of all surveyed economists. The August employment data was revised from 142,000 to 159,000, while July’s data was revised upward by 55,000 to 144,000, resulting in a total upward revision of 72,000 jobs for August and July combined.
September’s job growth marked the largest increase since March this year, coupled with an unexpected decrease in the unemployment rate and a rise in year-on-year wage growth, easing concerns about the deterioration of the U.S. labor market.
Due to concerns about job prospects, the Fed cut rates by 25 basis points at its September meeting. The market believes that full employment is the reason for the Fed’s cautious approach to making significant rate cuts.
“Today’s report should also make the Fed feel a bit more at ease,” Feroli wrote in a report.
He stated that before the Fed’s November meeting, policymakers may only deviate from the “gradual path to rate normalization” if there are “fairly large” changes in economic indicators—including crucial inflation data to be released next week and another jobs report early in November.
Meanwhile, Bank of America’s Bhave also noted that economic data has been consistently “very strong” since the Fed’s last rate announcement, indicating that there is no need for another 25 basis point rate cut.