The Federal Reserve Chairman Jerome Powell sent clear signals on Wednesday that a first interest rate cut is possible in September.
However, fresh figures on the labor market and industry have created concern among investors that the inflation-dampening monetary policy is too tight – and that the Fed is acting too slowly to ease.
The market has priced in three consecutive cuts of 0.25 percentage points each during the second half of the year.
Now, the probability is increasing that the Fed will also need to make a double cut, with 0.50 percentage points, at one of its three upcoming rate-setting meetings – September, November, and December. The probability of this is currently 50 percent.
This would mean a reduction of the key interest rate – which has been in the range of 5.25-5.50 percent for a year – by a total of one percentage point this year.
Statistics showed on Thursday that the number of unemployed in the US increased more than expected, while the purchasing managers' index for the manufacturing industry indicates decreased activity.
Jerome Powell repeated his message on Wednesday that the Fed is data-dependent in its assessments and that the bank's leadership is aware of the risks of slowing down the labor market too much.
