Fears of an impending recession have some Wall Street economists betting that the Federal Reserve will approve an unusually big interest-rate cut when policymakers next meet in September. A majority of traders are already pricing in an 84.5% chance of a 50 basis point reduction during the Fed's meeting on Sept. 17-18, according to the CME Group, which tracks trading. Just 15.5% of traders think the Fed will approve a quarter-point cut.
With the unemployment rate above and core PCE inflation now below the Fed's year-end forecasts, we believe that the balance of risks favors more aggressive action by the Fed," UBS analysts wrote in a Friday note. "We are changing our base case to rate cuts of 50 basis points in September and 25 basis points each in November and December.
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