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September is seemingly the month Wall Street is pencilling in a cut to the base rate<\/a> by the Fed\u2014but former President Donald Trump won\u2019t be pleased. <\/p>\n In an interview with Bloomberg<\/a> released last week, the current Republican presidential nominee attempted to quash any plans to cut the base rate ahead of the November elections<\/a>.<\/p>\n \u201cIt\u2019s something that they know they shouldn\u2019t be doing,\u201d Trump said of the politically independent, non-partisan organization. <\/p>\n The former TV star\u2014having previously indicated<\/a> he would oust chairman Jerome Powell\u2014reversed his stance in the interview and said he would let Powell serve out the rest of his term \u201cespecially if I thought he was doing the right thing.\u201d<\/p>\n Yet Wall Street, at least, seems certain Powell and his six colleagues on the Board of Governors are going to defy the Republican nominee. <\/p>\n Their confidence springs both from\u00a0slowing economic data<\/a>\u00a0and from public remarks made by members of the board in recent weeks.<\/p>\n Last week<\/a> Federal Reserve Governor Christopher Waller\u00a0said the time for rate cuts is \u201cdrawing closer\u201d but hasn\u2019t yet reached its \u201cfinal destination.\u201d <\/p>\n Likewise New York Fed President John Williams told the Wall Street Journal<\/a><\/em> there are \u201cpositive signs\u201d that inflation is headed in the right direction, but would like to see some further data before making any cut decisions.<\/p>\n As a result many analysts are reading between the lines\u2014not to an immediate cut but an imminent one.<\/p>\n Yesterday Reuters<\/a> released its ongoing poll of 100 economists and when they believed rates will be cut. While all the experts said the Fed will keep rates unchanged in the next announcement at the end of July, 82% forecast the first cut of 25 basis points will come in September. <\/p>\n This notion isn\u2019t out of the blue\u2014the Reuters poll from the same time last month found approximately 60% of economists were confident of a rate cut in September, and that consensus is clearly growing.<\/p>\n This stance is backed more widely by the likes of Wharton professor Jeremy Siegel, who wrote in his weekly commentary<\/a> for Wisdom Tree this week: \u201cThe market expects the Fed to signal a rate cut in September, provided economic trends continue as anticipated. I agree.\u201d<\/p>\n Siegel points to rising numbers of jobless claims following the July 4 holiday, with the U.S. Department of Labor\u2019s most recent figures<\/a> revealing a 20,000 person increase from the week prior.<\/p>\n While Siegel highlighted that some economists believe jobless figures will fluctuate as the aftermath of Texas\u2019 Hurricane Beryl evens out, he adds: \u201cSuch mixed signals complicate forecasts but the big picture suggests a slowing consumer.\u201d<\/p>\n Chairman Powell will be mindful of warnings<\/a> from the likes of Bank of America<\/a> CEO Brian Moynihan not to push consumers too far, but likewise will be continuing to push towards the Fed\u2019s target inflation of 2%. <\/p>\n Which is perhaps why Bank of America, while acknowledging that a September cut is an option, is hedging its bets. <\/p>\n In a note seen by Fortune<\/em> published Sunday, economists Tatonga Rusike and Mikhail Liluashvili wrote: \u201cOur U.S. economists still believe the first rate cut for the Fed will come at the beginning of December. They raise concerns that the economy is not cooling enough to support an early rate cut. Signs for September are there but not strong enough to suggest actual cuts.\u201d <\/p>\n On Governor Waller\u2019s comments, Rusike and Liluashvili added: \u201cIt appears clear\u00a0to us\u00a0that the committee has moved closer to thinking that the first rate cut could happen in September. But, given Governor Waller\u2019s remarks, we are not convinced the majority of the committee is \u2018there\u2019 on September just yet.\u201d<\/p>\n Other institutions are taking a more confident approach.<\/p>\n Goldman Sachs<\/a> has doubled down on its September call, especially in light of the comments from Waller and Williams. In a note seen by Fortune<\/em> released last week the bank wrote: \u201cThese comments reinforce our view that the FOMC will deliver the first rate cut at its September meeting.\u201d<\/p>\n Meanwhile UBS\u2019s Brian Rose, senior U.S. economist, wrote Monday there is a :near-100% chance\u201d of a September cut. <\/p>\n Rose said: \u201cThe market is now pricing in more than two 25-basis-point\u00a0rate\u00a0cuts by year-end, including a near-100% chance of a September\u00a0cut. <\/p>\n \u201cOur view remains that the Fed will\u00a0cut\u00a0only once per quarter in the quarters ahead. However, the Fed could\u00a0cut much more aggressively if the economy takes a turn for the worse. On the fiscal side, we do not expect significant policy changes until after the election.\u201d\u00a0<\/p>\n<\/div>\n\nWall Street\u2019s thoughts<\/h2>\n
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