Barclays: The Federal Reserve is unlikely to cut interest rates by 50 basis points in September

Media reports, Barclays stated that we now expect the Federal Reserve FOMC to cut interest rates three times in September, November and December this year, each time by 25 basis points. We assume that the labor market will show continued resilience in the August report and that unemployment will stop rising. Based on this assumption, we currently believe it is unreasonable to cut interest rates by 50 basis points in September. However, if unemployment continues to rise further, it would raise concerns about a faster-than-expected cooling of the labor market. Looking ahead to 2025, we expect unemployment rate will gradually drop to 4.2%, with inflation forecasts remaining unchanged. We continue to anticipate FOMC will reduce interest rates three more times next March, June and September; concerns over lack of further progress on inflation for second half of 2025 are expected lead FOMC pause its rate-cutting action after federal funds rate range reaches between 3.75% -4%. In long term view ,we still consider neutral interest rate level around between 3%-3.25%.