Still betting on Nvidia? Our AI picked this stock instead; it’s up 96%+ THIS MONTH
Investing.com - A soft U.S. jobs report bolsters the case for the Federal Reserve to roll out an interest rate reduction as soon as its next meeting in September, according to analysts at Nomura.
Last week, figures from the Bureau of Labor Statistics showed that the U.S. added fewer jobs than anticipated in July.
However, much of the reaction to Friday’s report swirled around its heavy downward revisions to numbers from June and May, which indicated that the economy’s resilience since President Donald Trump’s announcement of elevated "reciprocal" tariffs on April 2 was not as strong as it had seemed.
Stocks fell in the wake of the jobs data, with sentiment also pinned down by Trump’s decision to roll out new heightened tariffs on a range of countries late on Thursday.
Trump further exacerbated concerns over the data when he announced the firing of the commissioner of the BLS, citing, without providing evidence, his belief that the numbers were "rigged." A replacement is expected to revealed over the next three to four days, the president said on Sunday.
In a note, the Nomura analysts argued that, if the BLS data had been released prior to the Fed’s last interest rate decision on Wednesday, the central bank would have slashed borrowing costs. Flagging the need to see more data to determine the impact of Trump’s tariffs on the wider economy, the Fed kept rates steady at a range of 4.25% to 4.5%.
Although media reports have suggested that many Fed officials have yet to become more dovish following the jobs report, markets are now widely pricing in a rate reduction at the conclusion of the central bank’s September 16-17 gathering. According to CME’s FedWatch Tool, the chances of a quarter-point cut next month stand at nearly 80%.
"[U]nless economic data improves much more than expected by the next meeting in September, a rate cut decision then seems like a natural decision," the Nomura analysts wrote.
"That said, monetary policy views and market views will differ significantly depending on whether this sharp slowdown in payroll gains over the past three months is seen as the result of corporate activity halted temporarily due to the tariff shock or as a sign of weak consumer spending and investment activity that will worsen further going forward."