Major Wall Street brokerages are rapidly adjusting their forecasts for U.S. monetary policy after Federal Reserve Chair Jerome Powell signaled rising risks in the labor market. His remarks at the Jackson Hole symposium show the central bank’s focus may now shift to protecting employment.
Speaking on Friday, Powell said the Fed’s restrictive policy stance has placed the economy at a “curious kind of balance” where both hiring demand and labor supply have slowed. He warned that this equilibrium carried the risk of sudden decline through layoffs and higher unemployment.
Related: All Eyes on Powell: The Three Scenarios for the Fed’s Speech and What They Mean for Crypto
“This unusual situation suggests that downside risks to employment are rising,” Powell stated, noting that such risks could emerge quickly. He explained that the Fed’s dual mandate, managing both inflation and employment, was increasingly difficult to balance as trade policy added further strain.
Powell also noted that import tariffs from the Trump administration could pressure prices upward. However, he downplayed the risk of a wage-driven inflation spiral, citing the fragile state of the labor market. This comes as the Fed Ends Its Specialized Crypto Oversight, Returning to Standard Bank Supervision, showing a broader shift in focus.
Brokerages Pull Rate Cut Forecasts Forward
Following Powell’s remarks, several major brokerages revised their outlooks. Barclays moved its forecast for a rate cut from September 2026 all the way up to September 2025. BNP Paribas also abandoned its long-standing “hold” call, now expecting 25-basis-point cuts in both September and December.
Deutsche Bank and Macquarie quickly followed, adjusting their projections to include a quarter-point cut in September. Goldman Sachs and J.P. Morgan reaffirmed their existing calls for a September cut, solidifying the new Wall Street consensus.
Only Morgan Stanley and Bank of America remain on the fence, maintaining that a cut will depend on more soft data.
Market Pricing Snaps to Attention
Investor sentiment has shifted dramatically. According to the CME FedWatch Tool, the market now prices in an 87.3% probability of a quarter-point cut at the September FOMC meeting.
The FOMC is scheduled to convene on September 16 and 17. If delivered, a September cut would mark the central bank’s first policy easing since holding rates at restrictive levels to contain inflation.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
