Finance
Major brokerages pivot to Sept Fed rate cut on Powell's labor warning
Published by Global Banking & Finance Review®
Posted on August 25, 2025
2 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on August 25, 2025
2 min readLast updated: January 22, 2026
Major brokerages expect a September Fed rate cut due to labor market risks highlighted by Jerome Powell at Jackson Hole.
By Rashika Singh
(Reuters) -Major brokerages, including Barclays, BNP Paribas and Deutsche Bank, now expect a 25-basis-point U.S. Federal Reserve rate cut in September following Chair Jerome Powell's shift in tone at Jackson Hole toward rising risks in the labor market.
Powell's remarks at the Jackson Hole symposium emphasized a change in the Fed's reaction function, with greater weight now placed on labor market risks.
"This unusual situation suggests that downside risks to employment are rising," Powell said, warning that such risks could materialize quickly in the form of layoffs and a spike in unemployment.
In notes released on Friday after Powell's speech, Barclays pulled forward its previously expected September 2026 cut to September 2025, saying his speech introduced "an easing bias" and raised the bar for not cutting.
"Powell made (it) clear that the Fed intends to deliver a 'fine-tuning' rate cut in September unless the data dictates otherwise," wrote BNP economists, led by Calvin Tse. They reversed the brokerage's long-standing call for the Fed to stay on hold, forecasting cuts in both September and December.
Meanwhile, both Macquarie and Deutsche Bank revised their expectations of a cut in September and December, respectively, to a 25-bp cut each in those two months.
Morgan Stanley and BofA are the only two major Wall Street brokerages not expecting a September cut yet. Such a move is likely if incoming labor and inflation data confirm further softening, Morgan Stanley said.
Markets are now pricing in an 87% chance of a quarter-point rate cut at the September policy meeting, according to the CME FedWatch Tool, up from 75% before Powell's speech.
The rate-setting Federal Open Market Committee (FOMC) is scheduled to meet again on September 16 and 17.
Goldman Sachs and J.P. Morgan, meanwhile, reaffirmed their expectations for a September cut, aligning with the broader market view that softening data may warrant policy easing.
(Reporting by Rashika Singh in Bengaluru; Editing by Janane Venkatraman)
A Federal Reserve rate cut refers to a decision by the U.S. central bank to lower the interest rates at which banks lend to each other, aiming to stimulate economic activity.
Monetary policy is the process by which a central bank manages the money supply and interest rates to achieve specific economic objectives, such as controlling inflation and stabilizing currency.
Basis points are a unit of measurement used in finance to describe the percentage change in the value of financial instruments. One basis point is equal to 0.01%.
The labor market is the supply and demand for labor, where employers seek to hire workers and individuals seek jobs. It is influenced by economic conditions and policies.
An FOMC meeting is a gathering of the Federal Open Market Committee, which is responsible for setting monetary policy in the U.S., including interest rates and money supply.
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