- JPMorgan's Fabio Bassi expects the Fed to cut rates by 25 basis points in September, citing weak payrolls but persistent inflation.
- A larger 50bp cut is viewed as unlikely, with recession risk estimated at around 40%.
- Political pressure on the Fed is rising following Governor Cook's dismissal, though the bank's independence is seen as structurally intact.
JPMorgan Chase & Co. strategist Fabio Bassi is advising clients to anticipate a measured 25 basis-point rate cut from the Federal Reserve in September, pushing back against market whispers of a more aggressive half-point reduction. The call is predicated on a nuanced reading of recent economic data, which shows payroll growth softening but inflation remaining stubbornly above the central bank's target.
"A 50bp move is unlikely," Bassi said, characterizing the current economic backdrop as a high-wire act for policymakers. While the risk of a recession stands near 40%, markets are only pricing in modest easing to address these growth concerns, suggesting a disconnect that the Fed will be cautious to bridge too hastily.
The analysis arrives amid heightened political scrutiny of the central bank following the recent dismissal of Governor Cook. Bassi noted the new pressure but affirmed that the Fed's operational independence remains a core tenet, unlikely to be swayed by short-term political winds.
If incoming data confirms that the current economic weakness is merely a temporary soft patch, Bassi envisions a notably shallow easing path ahead. This scenario would likely limit any significant pullback in risk assets and could provide further tailwinds for a strengthening US dollar, as more aggressive rate cut expectations are pared back. The firm's outlook suggests a defensive posture is warranted until a clearer trend in the data emerges.