Weak U.S. Jobs, Inflation Signal Fed Rate Cut Next Week

Recent U.S. economic data, including softer labor market figures and inflation rates slightly above expectations, have led markets to strongly anticipate a Federal Reserve interest rate cut at the upcoming policy meeting, with traders pricing in a 25-basis-point reduction and expectations of multiple cuts throughout 2025. Despite August's consumer price index showing inflation is not worsening significantly, the weak employment data is prompting the Fed to prioritize its jobs mandate and begin easing monetary policy. Investor sentiment has been buoyed by these expectations, contributing to record highs in major U.S. stock indexes, even as concerns grow over a potential recession highlighted by experts citing slowing consumer spending and persistent economic strains. Meanwhile, the Bank of Japan is expected to maintain steady interest rates, signaling cautious optimism about its economy's resilience to U.S. tariffs and global uncertainties, though it remains watchful of ongoing economic impacts. Overall, the Fed's forthcoming decision is viewed as a pivotal moment for the U.S. economy and global markets, with close attention on how it balances inflation control with supporting employment.