JPMorgan Outlines Expectations for the Fed’s September Meeting

As the Federal Reserve (Fed) heads into its September 17 policy meeting, market participants are closely watching for signals on the next move. JPMorgan strategist Fabio Bassi has shared his outlook, highlighting the most probable scenario for the central bank’s upcoming decision.

A 25 Basis Point Cut Seen as the Base Case

According to Bassi, the most likely outcome is a 25 basis point rate cut. Despite weaker labor market figures, he noted that inflation remains stubbornly high, which makes a more aggressive 50 basis point reduction far less likely.

Recession Odds and Market Sentiment

Bassi currently estimates the probability of a U.S. recession at around 40%. Still, financial markets expect only a modest easing cycle due to concerns over growth risks. He also touched on political dynamics, referencing the removal of Fed Governor Lisa Cook, but emphasized that the central bank’s independence remains intact.

If the current signs of weakness prove to be temporary, Bassi expects the Fed to pursue a shallow rate-cutting path, which could result in limited pullbacks in risk assets and a stronger U.S. dollar.

Markets Price in a High Probability of a Cut

Investor expectations strongly align with Bassi’s view. Futures markets now assign an 88% probability to a 25 basis point cut at the September meeting. This conviction has been reinforced by the release of disappointing labor market data: just 22,000 jobs added in August and an unemployment rate rising to 4.3%.

Other Institutions Weigh In

• Citi Chief Economist Andrew Hollenhorst argued that weak data supports rate cuts but does not justify a larger 50 basis point move.

• Nomura’s David Seif suggested the Fed could pursue so-called “insurance cuts” to guard against labor market weakness.

• Apollo’s Chief Economist Torsten Slok projected that despite inflation remaining above target, the easing cycle is likely to continue.

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