JPMorgan's Feroli: Another 50 Bps Fed Cut on the Horizon

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JPMorgan Chase & Co.'s chief US economist, Michael Feroli, is anticipating another 50 basis point (bps) cut in the federal funds rate by the Federal Reserve (Fed) in November. Feroli, who correctly predicted the Fed's half-point interest-rate cut on Wednesday, is now looking ahead to the next meeting, where he expects a similar reduction. This article explores the economic indicators Feroli is tracking, the potential implications of a 50 bps rate cut, and how his prediction aligns with other major financial institutions' forecasts.

Feroli is closely monitoring key economic indicators, such as inflation, employment, and GDP growth, to support his prediction. Inflation, as measured by the Consumer Price Index (CPI), has been declining, with the most recent reading at 3.9% on a 12-month basis. However, Feroli expects further softening in the labor market to feed through to softer service inflation going forward. Meanwhile, the unemployment rate has been relatively stable, inching up to 4.3% in July, which has triggered a recession indicator known as the Sahm Rule. Feroli believes that the risks to both employment and inflation warrant a more aggressive Fed response.

A 50 bps rate cut in November could have significant implications for the broader economy and financial markets. Lower interest rates make borrowing cheaper, which could stimulate economic activity and support businesses. However, it may also lead to a decrease in the value of the US dollar, potentially impacting international trade and investments. Furthermore, lower interest rates can encourage risk-taking, potentially leading to asset price bubbles.