{"id":65275,"date":"2025-08-13T14:32:13","date_gmt":"2025-08-13T14:32:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/65275\/"},"modified":"2025-08-13T14:32:13","modified_gmt":"2025-08-13T14:32:13","slug":"scott-bessent-questions-whether-powell-should-cut-rates-by-0-50bps-in-september","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/65275\/","title":{"rendered":"Scott Bessent questions whether Powell should cut rates by 0.50bps in September"},"content":{"rendered":"

Investors are pricing in more than a 96% chance<\/a> of the Fed cutting the base rate in September, following a cooler-than-expected inflation<\/a> report for July, released yesterday. <\/p>\n

But this isn\u2019t the only pressure Jerome Powell and the Federal Open Market Committee (FOMC) are under: Analysts and politicians are also getting their orders in for how much of a cut they want to see. <\/p>\n

Despite the fact that the FOMC has reiterated time and again that their decision is based on economic data and anecdotal evidence only, that hasn\u2019t stopped high-profile individuals having their say.<\/p>\n

Treasury Secretary Scott Bessent, for example, told Fox News yesterday<\/a> that the \u201cfantastic\u201d CPI numbers have lead him to question \u201cshould we get a 50 basis-point rate cut in September.\u201d <\/p>\n

His reasoning is that the Fed should have cut in June and July, had they known the fuller picture about the labor market<\/a>. Earlier this month the Bureau of Labor Statistics shocked markets when it revealed payrolls grew by just 73,000 last month<\/a>, well below forecasts for about 100,000. Meanwhile, May\u2019s tally was cut down from 144,000 to 19,000, and June\u2019s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000.<\/p>\n

The motivation for a larger cut would be to \u201cmake up\u201d for the missed opportunities earlier this summer, Bessent added. <\/p>\n

It\u2019s unsurprising that Bessent would lead the charge for a larger reduction. He is backing the stance of the Oval Office that Powell and the Fed have been too slow to normalize monetary policy, and are hampering economic activity as a result. Yesterday President Trump reiterated this call, writing on Truth Social<\/a>: \u201cIt has been proven, that even at this late stage, tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury\u2019s coffers.\u201d<\/p>\n

While analysts aren\u2019t sold on the idea of a larger reduction to the base rate, they\u2019re not ruling it out either. Speaking ahead of the release of the CPI data yesterday, State Street<\/a> Global\u2019s Tim Graf told Reuters<\/a> that while markets are unlikely to fully bake in a reduction of two clicks, investors may begin to hedge toward the possibility as we get closer to the September meeting. They won\u2019t price \u201cthat it will be delivered,\u201d he said, \u201cbut that the probability is above say 0%.\u201d<\/p>\n

The tone of the FOMC is also likely to turn more dovish, after two dissenters already split from the pack in July over the committee\u2019s decision to keep the base rate at 4.25% to 4.5%. And their stance is likely to be further boosted by the appointment at the next meeting by Trump-nominee Stephen Miran\u2014widely seen by the market as a dove who will push for rates to lower. <\/p>\n

But with the FOMC missing a meeting this month\u2014instead heading for the Jackson Hole Symposium\u2014the committee will have more time, and crucial data, to help inform their decision. <\/p>\n

Investors should take notice too, wrote Deutsche Bank\u2019s Jim Reid in a note to clients this morning, instead of treating a September cut as a foregone conclusion. \u201cThe main takeaway was for the Federal Reserve, as investors dialled up the likelihood of a 25bps rate cut in September,\u201d Reid wrote.\u00a0\u201cIt was the same story for the coming months as well, with 105bps of cuts priced in by the June 2026 meeting at the close, up +4.4bps on the previous day.: <\/p>\n

He added: \u201cIn their CPI recap, Deutsche Bank\u2019s U.S. economists think that the release isn\u2019t likely to move Fed officials from their priors in either direction, and that the upcoming labour market data will be more important with respect to near-term cuts.\u201d<\/p>\n

\u201cWith overall inflation likely under control amid a slowing economy, our base case remains that the\u00a0Fed\u00a0will resume rate cuts at the September meeting and continue cutting for a total of 100bps,\u201d added Mark Haefele, CIO at UBS Global Wealth Management in a note to clients this morning. \u201cWe like medium-duration quality bonds for investors seeking portfolio income amid falling cash rates.\u201d<\/p>\n

Core inflation snag<\/p>\n

Markets are perhaps willingly overlooking the small niggle of core inflation notching up to 3.1% in yesterday\u2019s release. This reading (as opposed to headline inflation of 2.7%) may arguably hold more weight with the Fed as it doesn\u2019t include volatile assets like food prices, and sits well ahead of the 2% target. <\/p>\n

For this very reason, a portion of analysts are convinced that contrary to the majority opinion, the July data has lowered the likelihood of a cut.<\/p>\n

\u201cIt seems fair to say that the Fed could be considering a move in\u00a0September, but I don\u2019t think a cut at that meeting is as much of a given as market pricing is implying,\u201d wrote JPMorgan\u2019s head of investment strategy, Elyse Ausenbaugh, following the report\u2019s release. \u201cWe will get plenty of data between now and then that could give the Fed pause one more time before taking action in the fourth quarter.\u201d<\/p>\n

\u201cDo not expect a September rate cut\u201d was the message from Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report. Tentarelli wrote: \u201cThe July payrolls report missed forecasts and the unemployment rate ticked higher\u2014signs of a potentially weakening labor market. Meanwhile, 12-month CPI came in above the prior month for June and now for July.\u00a0\u00a0<\/p>\n

\u201cWhile one data point does not make a trend, two consecutive months of higher 12-month inflation will make it difficult for the Fed to justify a rate cut at their\u00a0September\u00a017 meeting. We remain bullish on the S&P 500 index into year end, but we do not expect a\u00a0September\u00a0rate cut\u00a0unless the jobs market drops off drastically over the next 45 days.\u201d <\/p>\n

Jobs data released in September will hold more sway over the Fed\u2019s decision, added Bill Adams, chief economist for Comerica<\/a> Bank, who said the July CPI report made it less likely for the Fed to cut in September because inflation came from \u201csticky service prices rather than tariff-affected goods.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Investors are pricing in more than a 96% chance of the Fed cutting the base rate in September,…\n","protected":false},"author":2,"featured_media":65276,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,63,99,2490,43403,52031,176,1073,171],"class_list":{"0":"post-65275","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-donald-trump","12":"tag-fed-interest-rate","13":"tag-fed-interest-rates","14":"tag-federal-reserve","15":"tag-jerome-powell","16":"tag-markets"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/65275","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=65275"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/65275\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/65276"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=65275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=65275"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=65275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}