Based on the latest information, it’s quite likely that the Fed will cut rates at least a couple more times this year. Here’s a breakdown of the evidence, the Fed’s stance, and what could make cuts more or less likely:
✅ Why More Cuts Are Likely
Recent Cut + Dot Plot Projections After cutting the fed funds rate by 25 basis points (bps), Fed officials projected two more quarter-point cuts for the remainder of 2025. (Reuters)
Economic Indicators Softening The labor market is weakening (job growth slowing, revisions showing far fewer jobs added), which shifts the Fed’s risk assessment toward downside risks for employment. (Reuters) Inflation remains above target but hasn’t been accelerating aggressively, giving the Fed some leeway. (Federal Reserve)
Market Expectations Futures markets and major banks are leaning toward more cuts. For example, JPMorgan sees a strong chance of another 25-bps cut, and some analysts believe there could be three or more cuts into early 2026. (Business Insider)
⚠️ What Could Prevent or Limit Further Cuts
If inflation (especially core PCE or CPI) remains stubbornly high or turns up again, that could make the Fed more cautious.
Stronger-than-expected economic data (GDP growth, consumer spending, manufacturing) might reduce pressure to ease.
Global risks or shocks (e.g. energy price spikes, geopolitics, trade policy issues) that push up inflation or disrupt supply chains.
Concerns about losing credibility in inflation control could push the Fed to move slower.
📊 What to Expect
Here’s a rough timeline and what markets are pricing in:
Two more 25-bps cuts during the rest of 2025, likely at upcoming FOMC meetings. (Reuters)
Possible one more cut in early 2026, depending on how inflation and labor market data evolve. (Federal Reserve)
The Feds just cut interest rates by 25 basis point (bp). Here’s what that signals and how it ripples out:
🏦 Economic Meaning
Cheaper Credit: Mortgages, auto loans, and business loans gradually become cheaper.
Stimulus: Encourages spending and investment, aiming to support slowing growth.
Confidence Signal: A 25 bp cut is a measured step — not panic, but a sign the Fed sees the economy softening.
Inflation Watch: The Fed is easing, but carefully — they’re not sure inflation is fully under control.
📊 Market Impact
Stocks: Generally bullish — especially for growth/tech and real estate. But if investors think the cut means a looming recession, gains may fade.
Bonds: Short-term yields fall most, boosting bond prices. Long-term yields may fall too if growth fears rise.
U.S. Dollar: Slightly weaker — lower yields make USD less attractive.
Gold/Commodities: Gold often rises (lower real yields), oil/metals can benefit if growth looks supported.
Banks: Mixed — loan demand improves, but margins may narrow.
⚖️ Context
If inflation is falling, this cut looks supportive → “soft landing” optimism.
If inflation is still sticky, the cut risks fueling more price pressures → markets may get nervous.
✅ Bottom line: A 25 bp cut is the Fed’s way of saying: “We see the economy slowing, but we’re not in crisis mode.” It’s a supportive move, not a rescue move.
The latest PPI numbers indicate that inflation pressures at the wholesale/producer level are easing overall, even though a few service categories are still running hot.
🏦 Impact on markets & the Fed:
Bond market → Likely to rally (yields fall) since cooling PPI supports the case for Fed rate cuts.
Equities → Could get a boost, especially rate-sensitive sectors (tech, real estate, small caps), as investors price in lower borrowing costs.
USD → Could weaken if markets see softer inflation + higher odds of rate cuts.
Commodities → May drift lower if weaker input prices persist, though energy and food can swing independently.
🔑 Takeaway:
PPI is an early signal. If it continues trending down, it strengthens the Fed’s case for easing policy. But if consumer inflation (CPI/PCE) stays sticky, the Fed may still tread carefully.
Here’s what the latest PPI (Producer Price Index) numbers show — and what they’re likely to mean for markets / policy.
🔍 What the Data Says
From the U.S. Bureau of Labor Statistics:
PPI for final demand declined 0.1% in August (seasonally adjusted).
On a year-over-year basis, producer prices rose 2.6%.
Core PPI (excluding food, energy, and trade services) rose 0.3% month-over-month for August.
Final demand services dropped ~0.2% for the month. Final demand goods rose about 0.1%.
So, broadly: wholesale inflation cooled in August, with some price pressures still present (especially in core PPI), but not accelerating.
⚙️ What It Indicates
A few key takeaways from these numbers:
Cooling Inflation Pressures Upstream
The drop in final demand services suggests companies aren’t easily passing on price increases (for services/trade).
Goods inflation is modest, which means upstream input costs aren’t surging out of control.
Core Inflation Remains Sticky but Manageable
The core PPI rise (excluding volatile food, energy, trade services) shows that inflation in some sectors is still active.
But with final demand overall dipping, there’s potential for this to feed into lower consumer inflation over time.
Tariffs & Trade Pressures May Be Easing
Some analysts point out that import/wholesale price effects from tariffs and disrupted supply chains might be moderating or getting absorbed.
Supports Case for Fed Rate Cuts (But Cautiously)
Softer wholesale inflation gives the Federal Reserve more wiggle room to consider easing.
However, the Fed will still want to see CPI or PCE inflation behaving similarly before acting aggressively.
📈 Likely Market / Policy Reactions
Given this PPI report, here’s how markets and policymakers are likely to respond:
Asset / Policy
Likely Impact
Stocks
Positive overall. Especially rate-sensitive sectors (housing, tech) should benefit from the idea that inflation (and thus rates) may be under control.
Bonds
Yields (especially short-term) likely drop as traders increase the probability of a Fed rate cut. Bonds rally.
U.S. Dollar
Probably weaker, as rate expectations ease and real yields diminish somewhat.
Gold / Safe Assets
Likely to gain, as inflation remains present but not accelerating dramatically — safe havens tend to benefit in that environment.
Fed Policy
A 25 bps cut seems more likely; bigger moves would hinge on additional weak data (CPI, labor). The Fed would probably proceed carefully, emphasizing data dependence.
🧮 Risks & What to Watch
If upcoming CPI or PCE inflation reports surprise to the upside, this cooling trend could reverse.
Labor market strength/hiring could still push inflation via wage pressure, which the PPI doesn’t fully capture.
Persistent inflation expectations (consumers, businesses) can become self-fulfilling, undermining these soft signals.
For the first time since the COVID-19 pandemic, the number of unemployed people in the U.S. has exceeded the number of available job openings. In July 2025, job openings dropped to approximately 7.18 million, while the number of unemployed stood slightly higher at around 7.2 million.
What This Means
Labor Market Cooling: Traditionally, job openings outnumber unemployed individuals—a sign of a tight labor market with plenty of opportunities. This reversal signals a shift toward a cooler labor market with weaker demand for workers.
Fed Policy Implications: This cooling supports expectations that the Federal Reserve may cut interest rates soon, as a softer labor market raises concerns about slower economic growth.
Economic Drag Ahead: Fewer openings may reduce job mobility, slow wage growth, and limit opportunities for career advancement. Analysts describe this as “another crack in the labor market,” which could drag on consumer spending and overall economic vitality.
Quick Snapshot
Metric
July 2025 (Approx.)
Unemployed Persons
~7.2 million
Job Openings
~7.18 million
Outcome
Unemployed > Openings
Sectoral Impact — Sectors Most Affected (Falling Openings)
According to JOLTS and recent reports:
Healthcare & Social Assistance
Saw a notable decline in job openings in July, despite historically strong demand in this sector.
Retail Trade
Also recorded a pullback in vacancies in July, contributing to the broader opening-end unemployment crossover.
Accommodation & Food Services (Hospitality)
Experienced one of the largest month-to-month falls in opening counts—down by around 308,000 in June.
Construction
Continues to struggle, with openings declining (e.g., –38,000 in March). It also hit the lowest hiring rate on record in March.
Sectors Holding Up Relatively Better
Retail Trade (May boost)
While retail saw declines later, May saw a +190,000 increase in openings. This suggests some volatility and sector-specific timing differences.
Manufacturing
Exhibited small gains earlier in the year (+4,000 openings in March).
But longer-term trends and job losses (e.g., in July’s payroll data) indicate deeper weaknesses in manufacturing hiring over time.
Summary Table: Sector Snapshot
Sector
Recent Trend in Job Openings
Healthcare & Social Assistance
Sharp decline in July—major past demand now cooling
Retail Trade
Decline in July openings; volatile gains in May
Hospitality (Food & Accomm.)
Big drop in openings (~308k decline in June)
Construction
Ongoing struggle—falling openings and lowest hires rate
Manufacturing
Slight gains earlier, but broader weakness rising
Key Takeaways
Sectors like healthcare, retail, hospitality, and construction are experiencing sharper drops in recruitment and openings, likely reflecting weakening demand and economic caution.
Manufacturing shows a more mixed trend—modest openings earlier but tempered by recent job cuts and macro pressures.
Even once-robust sectors like healthcare are now cooling, which underscores the breadth of the labor slowdown.
Bottom Line
There are now more unemployed Americans than job openings, marking a notable shift in the U.S. labor market. It reflects cooling conditions, reinforces expectations for rate cuts, and raises concerns about a slowdown in job creation and consumer strength.
The short answer: Yes, indicators are pointing to a slowdown, particularly in economic growth, hiring, and consumer sentiment—though not a full-blown recession yet.
Signs of Economic Softness
The Federal Reserve’s Beige Book for late August points to a sluggish U.S. economy: slower hiring, cautious consumer spending, and persistent inflation pressure. Businesses are hesitant to refill vacant roles.
Businesses across most Fed districts report stagnant growth, with hiring freezes and rising prices affecting both demand and sentiment.
JP Morgan now estimates a 40% probability of recession by end of 2025, signaling elevated downside risks.
Conference Board projections: U.S. real GDP growth is expected to slow to 1.6% in 2025, slowing further to 1.3% in 2026, though no recession is projected yet.
St. Louis Fed data: Real GDP grew at an annualized 1.4% in H1 2025, modest and below long-term potential. The outlook for H2 remains moderate, with potential for recovery in 2026.
Global Growth Is Under Strain
The IMF projects global growth to remain at about 3.2% in 2025, consistent with 2024 levels—a slower pace than pre-pandemic norms.
The World Bank has downgraded its global growth forecast to 2.3% in 2025, one of the weakest periods outside major recessions. This slowdown is driven by rising trade barriers and uncertainty.
However, some hope: Oxford Economics notes that business confidence is quietly rebounding. Global GDP could surpass 3% by mid-2026 if geopolitical risks ease and AI-driven investment picks up.
Markets Reflect Caution and Fragility
Hedge funds are exhibiting risk aversion: many were net sellers in August amid fragile sentiment and seasonal volatility concerns for September.
Financial Times podcast warns of hidden risks: overvalued U.S. equities (especially tech and AI), inflows into private markets, and potential triggers like a hit to the Treasury market or excess in AI infrastructure.
Dimming — low growth forecasts, but possible rebound by mid-2026
Bottom Line
The economy is indeed showing signs of a slowdown, particularly in hiring, consumption, and growth metrics. Markets are responding with increased caution, though a recession hasn’t fully materialized yet. The main question now is whether the slowdown is temporary—with policy levers and investment innovations setting the stage for a rebound—or if it deepens into something more prolonged.
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