Markets see 87% chance of September cut as traders respond to Powell’s Jackson Hole remarks
Layoffs and a potential spike in unemployment are now central to US Federal Reserve policy debates, after Chair Jerome Powell warned of rising labour market risks at the Jackson Hole symposium.
As reported by Reuters, Powell said, “downside risks to employment are rising,” cautioning that these risks could materialize quickly.
He added that “monetary policy must be forward-looking and consider the lags in its effects on the economy,” noting the Fed’s need to balance risks to both its inflation and employment mandates.
Following Powell’s remarks, several brokerages accelerated their forecasts.
According to Reuters, Barclays brought forward its expected rate cut from 2026 to September 2025, citing Powell’s “easing bias.”
BNP Paribas economists led by Calvin Tse wrote that Powell made it clear the Fed intends to deliver a “fine-tuning” cut in September unless data dictates otherwise. They now expect reductions in both September and December.
Deutsche Bank and Macquarie also adjusted projections to include two 25-basis-point cuts this year, in September and December.
Goldman Sachs, J.P. Morgan, Citigroup and Wells Fargo reaffirmed forecasts for three cuts starting in September, totalling 75 bps by year-end.
Not all institutions see easing ahead.
As per Reuters, Bank of America said “barring further deterioration of the labor market, we think that the Fed would risk a policy error if it were to cut rates,” pointing to persistent inflation and signs of economic rebound.
Morgan Stanley also forecast no September cut unless incoming data confirm further softening.
Brokerage projections for 2025 vary widely. UBS Global Research expects 100 bps of cuts beginning in September.
HSBC, Barclays, Deutsche Bank, Macquarie, BNP Paribas and Nomura each foresee 50 bps in reductions.
By contrast, BofA Global Research and Morgan Stanley expect no cuts, keeping the Fed funds rate at 4.25–4.50 percent.
Market pricing has shifted sharply.
According to CME FedWatch data cited by Reuters, traders now assign an 87 percent probability of a 25-bp cut in September, up from 75 percent before Powell’s speech.
LSEG data show traders pricing in 52.3 bps of cuts by year-end.
