JP Morgan expects US Fed to cut interest rates by 100 bps this year

JP Morgan analysts believe that the growing uncertainty and the weakness of the US labor market has forced the US Federal Reserve to change course from gradual steps to fearing a too-late rate cut.

"The weak labor demand and rising unemployment raise concerns about the US economy slipping into recession, despite financial market optimism about the future path of business performance," the US lender said in a note.

The analysts added that Jerome Powell’s speech at Jackson Hole confirms a shift in the assessment of risks, and that the Fed does not want to wait until business conditions improve, which means that interest rates should be cut by about 100 basis points (bps) by the end of this year.

With only three policy meetings remaining this year, analysts see that the Fed should shift from a minor cut by 25 bps at each meeting, to a 50 bps monetary easing during at least one of its meetings this year.