The Federal Reserve likely isn’t done with jumbo rate cuts and could deliver another one in November, said JPMorgan Chase economist Michael Feroli, who accurately called the central bank’s move Wednesday. At its much-anticipated meeting Wednesday, the Fed approved a half percentage point, or 50 basis point, cut to its benchmark funds rate that ran counter to the 25 basis point move that many Wall Street economists and strategists had been expecting. Moreover, policymakers indicated through their “dot plot” of expectations that another 50 basis points could get lopped off by the end of the year. The benchmark fed funds rate now stands at 4.75% to 5.00% after Wednesday’s move. If labor market reports continue to show weakness, Feroli, JPMorgan’s chief U.S. economist, thinks the Fed could repeat the half-point move at its Nov. 6-7 meeting that wraps up two days after the general election. “In terms of our outlook, we are still expecting a faster pace of rate normalization than the median dot,” Feroli said in a client note after this week’s Fed meeting. “Our expectation for a 50bp cut at the next meeting in early November is contingent on further softening in the two jobs reports between now and then. More benign labor data would, instead, seal the case for the FOMC’s goldilocks scenario of 25bp eases per meeting over the remainder of the year.” Futures market pricing Thursday suggested a 25 basis point move in November followed by a 50 basis point cut in December, according to the CME Group’s FedWatch. A basis point equals 0.01%. The Fed will see two more nonfarm payrolls counts before the November meeting. Over the past several months, job gains have been less than expected , helping push policymakers into a more aggressive easing stance. Fed Chair Jerome Powell stressed data dependence at his post-meeting news conference Wednesday, noting that the U.S. economy is healthy but that the central bank wants to recalibrate policy to support the labor market as opposed to just fighting inflation. “Ultimately what we found most important in what Powell said was also among the least surprising things he said: future decisions are going to depend on the data,” Feroli wrote. “If labor markets continue to soften, we could see more large cuts ahead. If job growth and the unemployment rate stabilize the path is clear for a gradual move back to neutral.”
