Bank of America estimates that the FED will cut interest rates by 25 basis points in September and make an additional rate cut in December. The Bank's revised outlook marks a change from its previous expectation that interest rates would be cut only in December.
Wasif Latif, president and chief investment officer of Sarmaya Partners, commented on the US July non-farm payrolls data and described the current market reaction as a “growth panic”. Latif suggested that the market has noticed a slowdown in economic growth and that the FED may face pressure to reduce interest rates as soon as possible. He noted that historically, delays in the Fed's rate adjustments have led to slower economic growth, and current data could lead to a rate cut in September.
However, Latif also emphasized that the current state of anxiety in the market has caused a shift towards high-quality assets, leading to the expected increases in bond prices.
Simcorp applied research manager Melissa Brown shared her views on non-farm employment data for July, which came in below expectations but remained positive. Brown stated that although employment growth was lower than expected, it was not at a level that would indicate a recession. He noted that the unemployment rate was higher than expected but still relatively low. Stating that more data will come before the FED's next meeting, Brown suggested that although a 50 basis point interest rate cut is possible, this is unlikely due to the FED's cautious stance. Brown pointed out the importance of the upcoming inflation report, which will provide important information on the balance between general inflation and income growth.
*This is not investment advice.