After correctly predicting the interest rate cut in September, JP Morgan forecasts that the next round of significant easing will depend on the employment market.

Wall Street giant JPMorgan economists correctly predicted the Federal Reserve's decision to cut interest rates by 50 basis points on Wednesday, indicating that another significant rate cut will depend on weakness in the US labor market. The bank's chief US economist Michael Feroli maintains that there will be another 50 basis point rate cut in November, but he notes that this view hinges on the outcome of the upcoming jobs report. Since August 2, this economist has been calling for a 50 basis point rate cut at the FOMC meeting on Wednesday, even when a colleague abandoned this bet, he stuck with it. JPMorgan's rate strategists are also cautious, expecting US Treasuries to remain range-bound until the September jobs report provides direction. The bank withdrew its recommendation for steepening trades in the 3-year and 30-year bond yield spread, but believes there is an opportunity to restart this trade before the next jobs report is released. In a report to clients after the Fed decision, Feroli wrote, "We still expect the pace of normalization to be faster than consensus, and the expectation of a 50 basis point rate cut in the next meeting in early November will depend on further softening in employment reports during this period. Conversely, more moderate employment data will set the stage for the FOMC to cut rates by 25 basis points at each of the remaining meetings this year." Additionally, Citigroup economists abandoned their call for a 50 basis point rate cut before this week's meeting, with internal divisions on bond market views but equally determined. Feroli continues to suggest that the Fed is lagging behind the situation in starting to cut rates and will take significant action. While JPMorgan is feeling confident, other Wall Street banks have started to adjust their forecasts. Goldman Sachs economists, led by Jan Hatzius, currently expect the period of consecutive 25 basis point rate cuts to be longer, extending from November to June 2025. However, they wrote that the decision between a 25 and 50 basis point rate cut in November is "a cliffhanger moment" and added that the determining factor will be the next two jobs reports. On Thursday, US Treasury yields slightly decreased, led by short-term Treasury bills, with the 2-year Treasury yield falling by 4 basis points to 3.58% and the 10-year Treasury yield decreasing by 1 basis point to 3.69%. Traders had been betting that the Fed would cut rates by another 70 basis points this year. JPMorgan's rate strategists, led by Jay Barry, wrote, "In the coming weeks, the US Treasury yield curve may become more narrow in its fluctuations. It is unlikely that the money market will reflect a faster pace of rate cuts or lower terminal rates until we see the September jobs report."