Fed 'behind the curve' in lowering rates following BLS revisions

So its turns out that President Trump was probably right. Yesterday’s BLS revisions have confirmed suspicions that the US jobs market is in a much worse state than markets were initially led to believe, which means that the Fed is now almost certainly behind the curve in lowering rates.

The question is now not whether the Fed will cut next week, but whether or not they will lower rates at each of the three meetings left in 2025 in September, October and December. Some strategists have called for a 50bp cut this month.

That’s all very well and good in theory, but we think that concerns over the long-end of the Treasury curve will discourage them from doing so.

Thursday’s US inflation report for August will be closely monitored this week. Monthly price pressures are expected to tick along at a 0.3% pace, with annual inflation set to rise to 2.9%.

The Fed has already hinted that it will look through tariff induced price spikes, however, so this week’s data will be dwarfed in importance by what the Fed has to say next Wednesday evening. We’ll be putting out our full thoughts ahead of next week’s meeting in our preview report in a few days time.