December Cut Holdouts See Clear Risks Of Earlier Move

BofA and NatWest remain out of consensus in seeing the first cut only in December, but they recognize that risks are to a nearer-term cut:

• BofA: “Regarding the bar for a September rate cut, Powell said that the Fed "could" cut if incoming data between now and then was similar to data that was received recently. He indicated that there was increased confidence within the committee that a September rate cut could happen, but data between now and then would have to validate the Fed's expectation. We think the Fed can be patient and wait for more evidence. Overall, we still forecast the first rate cut in December since we think downside risks to the economy are overstated. That said, a September cut has moved closer to the baseline and weakness in labor markets or more soft inflation data could tilt the balance in favor of earlier easing than we project.”
• NatWest: “As we have been highlighting … our expectation for one cut in December is at risk. Between now and September 18th officials will have several important economic reports on inflation and the labor market before following through with any rate cuts. Of course, Chair Powell and his colleagues will have a golden opportunity to sharpen their messaging at the Kansas City Fed’s Jackson Hole Economic Symposium on August 22-24.