AsianFin -- Standard Chartered has revised its U.S. Federal Reserve interest rate forecast, now expecting a 50-basis-point cut at the Fed’s upcoming policy meeting, up from its previous 25-basis-point projection. The change follows Friday’s weak August jobs data, which signaled a softening labor market.
In a client note, the bank highlighted that the U.S. labor market “went from solid to soft in less than six weeks.” Non-farm payrolls increased by just 22,000 in August, far below economists’ consensus forecast of 75,000. Meanwhile, the unemployment rate climbed to 4.3%, breaking out of its 15-month range and marking a notable slowdown in the nation’s job market.
The unexpectedly weak payroll figures add pressure on the Federal Reserve to ease monetary policy more aggressively than previously anticipated, as the central bank balances supporting economic growth against ongoing inflation concerns.
Analysts noted that the August jobs report could influence the Fed’s guidance on interest rates for the remainder of 2025. A larger-than-expected cut may help sustain economic expansion amid signs of slowing employment growth and cooling consumer demand.
“Given the sudden softening in the labor market, a 50-basis-point rate reduction appears increasingly likely,” Standard Chartered said. “This reflects the Fed’s need to respond swiftly to emerging economic risks while keeping inflation expectations anchored.”
The U.S. dollar and equity markets are expected to react to both the jobs data and the Fed’s upcoming decision, with investors closely monitoring the central bank’s statements for clues on the pace of future rate cuts.
Friday’s report underscores the Fed’s ongoing challenge of balancing labor market strength with broader economic stability, particularly as other indicators suggest slowing growth in key sectors such as manufacturing and services.
Standard Chartered’s forecast adjustment also aligns with other market signals pointing to a cooling U.S. economy, increasing speculation that the Fed may adopt a more dovish stance in its upcoming policy meetings.
The bank’s note concluded that, if implemented, a 50-basis-point cut could support liquidity and credit conditions, providing a buffer for businesses and consumers as the U.S. economy navigates the second half of 2025.
