Brokerages Now Expect September Fed Rate Cut After Powell’s Labor Market Warning

Powell’s Warning Shifts Market Expectations

A single speech by Federal Reserve Chair Jerome Powell has reshaped Wall Street’s outlook on monetary policy. Speaking at the Jackson Hole symposium, Powell signaled that the U.S. labor market could be weakening faster than expected, suggesting the Fed may need to lower interest rates sooner rather than later.

This shift marked a notable change from the Fed’s earlier inflation-focused stance. Powell emphasized that keeping policy too restrictive for too long could risk higher unemployment and broader economic strain.

Barclays, BNP Paribas, and Deutsche Bank Adjust Their Outlook

Several leading institutions quickly revised their views on when the Fed might move:

• Barclays now sees the first rate cut coming in September 2025, citing Powell’s concern over labor conditions.
• BNP Paribas updated its forecast to include two cuts this year—one in September and another in December.
• Deutsche Bank echoed that call, also expecting reductions in both September and December.

These updates reflect growing conviction that the Fed is preparing to pivot from a strict inflation-fighting stance toward safeguarding employment.

Some Banks Remain Cautious

Not all firms agree with this timeline.

• Bank of America warned that acting too soon could be a policy misstep unless economic data clearly confirms a slowdown in jobs and wages.
• Morgan Stanley also held back from calling a September move, saying more evidence will be needed before the Fed makes such a decision.

The divergence highlights just how uncertain the policy path remains.

Markets Price In Higher Odds of Easing

Investors, however, responded swiftly. The CME FedWatch Tool now shows an 87% probability of a September rate cut, up from about 75% before Powell’s remarks. Treasury yields dipped, while stocks rose as traders embraced the prospect of easier financial conditions.

Looking Ahead

The next key moment will be the Federal Open Market Committee (FOMC) meeting on September 16–17, where markets expect clarity on whether the Fed will begin easing.

For now, Powell’s labor-market warning has shifted sentiment sharply, and Wall Street is preparing for September to mark the start of a new rate-cutting cycle.