Gold prices remain near record highs; Fed cut bets prompt weekly gains
Investing.com -- Following today’s weaker-than-expected nonfarm payrolls report and uptick in the unemployment rate, economists at BofA Securities now expect two 25-bps rate cuts this year – one in September and the other in December.
August nonfarm payrolls were reported at 22,000, well below expectations of 75,000. Meanwhile, the unemployment rate increased to 4.3% from 4.2%.
“The August jobs report is likely to amplify the Fed’s concerns about labor market weakness,” U.S. economist Aditya Bhave said. “Job growth was anemic on the month, the u-rate ticked up to 4.3% and weaker-than-expected hours worked led to a slowdown in income growth. There is now clearer evidence of deterioration in labor demand, not just supply. Therefore, we are changing our Fed call to show two 25bp cuts this year, in Sep and Dec.”
Bhave doesn’t expect the Fed to lower in October, instead being patient with inflation still sticky.
“There is very little precedent for a cutting cycle in which the Fed doesn’t cut at every meeting,” the economist notes. “Yet with core PCE inflation likely to reach 3% in Aug and rise further through year-end, we don’t think the Fed will cut in Oct.”
For 2026, Bhave sees another 75 bps in cuts starting in June. “We stick to our view that the next Fed Chair will lead the FOMC in a more dovish direction,” he states.
Traders are pricing in a 100% probability of a September rate cut, and there is even a 10% chance of a jumbo 50 bps cut at the September 17th FOMC meeting.