Eurodollar University NEW Fed Report Says An Emergency 50bps Cut Now on the Table
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Sep 1, 2025 Federal Reserve officials are reassessing their strategies as job market trends highlight economic uncertainty. The discussion revolves around the potential for a significant interest rate cut due to fears of rising unemployment and shifting consumer sentiment. Troubling signs emerge from the manufacturing sector, where inventory levels are rising despite waning demand. This disconnect raises concerns about an upcoming economic downturn, revealing a stark gap between optimistic forecasts and actual economic performance.
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Waller Sees Summer Job Losses
- Christopher Waller suggests payrolls likely contracted over the summer, implying Labor Market weakness hidden in headline data.
- If revisions confirm job losses, the Fed may need to act preemptively with larger cuts.
Cut Size Hinges On Next Payrolls
- High unemployment expectations and weak payrolls would justify a larger 50bps cut instead of a minimal 25bps move.
- Waller argues the Fed should anticipate weakness rather than wait for it to fully appear in data.
Treat Initial Cuts As Conditional
- Avoid interpreting a single Fed cut as panic; policymakers may prefer a 25bps move to avoid spooking markets.
- Monitor subsequent meetings closely because the Fed can follow up with more cuts if data worsens.