The wind has changed! Powell's "dove voice" is loud, Barclays and Credit Suisse reverse course and predict a rate cut by the Federal Reserve in September.

Barclays and BNP Paribas expect the Federal Reserve to cut interest rates by 25 basis points in September. The reason is that Federal Reserve Chairman Jerome Powell's remarks on labor market risks at the Jackson Hole meeting have shifted. Barclays has brought forward its expected timing for the Fed rate cut from September 2026 to September 2025, stating that Powell's speech signaled a "dovish bias" and raised the threshold for not cutting rates. An economist team led by Jonathan Millar said, "We now expect two 25 basis point rate cuts this year, in September and December." BNP Paribas has also changed its long-held prediction of the Fed maintaining rates, now expecting rate cuts in September and December. BNP Paribas economist team led by Calvin Tse wrote in a report, "Powell explicitly stated the Fed's plan to make a slight rate cut in September, unless data suggests otherwise." Powell's comments at the Jackson Hole symposium highlighted the Fed's shift in reaction mechanism, now placing greater emphasis on labor market risks. Powell said, "This unusual situation indicates that the risks of a downturn in employment are increasing." He warned that such risks could quickly manifest in the form of layoffs and a surge in the unemployment rate. Deutsche Bank also predicts in a report released last Friday that the Fed will cut rates by 25 basis points in September and December 2025. According to the FedWatch tool from the Chicago Mercantile Exchange (CME), the market currently sees an 87% probability of a 25 basis point rate cut by the Fed at the September policy meeting, up from 75% before Powell's speech. The Federal Open Market Committee (FOMC) responsible for setting rates is scheduled to meet again on September 16 and 17.