Canadian Imperial Bank of Commerce: Market's expectation of a large rate cut by the Federal Reserve is overly optimistic.

The unusually weak August non-farm payrolls data in the United States, coupled with the downward revision of the June data to a negative value, has led the market to start betting that the Federal Reserve will cut interest rates by 50 basis points this month. However, Timothy Musial, an economist at the Canadian Imperial Bank of Commerce, believes that investors are overreacting. Currently, the majority of bets are still focused on a gradual 25 basis point rate cut, "I think this outcome is more likely." Musial predicts that the Federal Reserve will maintain policy flexibility after the meeting on September 17th, and will not commit to a rate cut in October. "Current GDP growth estimates are still at 3%, and inflation levels are also consistently above target," he added.