Several U.S. research institutions noted that the latest employment figures surpassed market expectations, potentially prompting the Federal Reserve to exercise caution in adjusting interest rate policies. It is anticipated that the rate cut in November may be reduced to just 25 basis points.
The U.S. Department of Labor reported a drop in the unemployment rate to 4.1% in September, with non-farm payrolls increasing by 254,000, significantly higher than expected. This positive employment data fueled gains in the New York stock market, with the Dow Jones Industrial Average hitting a record high.
Market institutions such as Bank of America, JPMorgan, and BlackRock expressed the belief that the Federal Reserve is likely to adopt a 25 basis point rate cut in the November meeting, rather than the previously anticipated 50 basis points. Aditya Bhave, Senior Global Economist at Bank of America, noted that the optimistic employment data might lead the Fed to reduce the rate cut.
CME Group's Fed tracking tool indicated that following the September employment report, the market now sees a more than 90% chance that the Fed will cut rates by 25 basis points in November, while the probability of a 50 basis point cut has dropped to zero.
Max Kettner, a strategist at HSBC, mentioned that the data supports a bullish position on risk assets. He advised investors to keep an eye on the performance of global stock markets and emerging market bonds.
In a recent move on September 18, the Federal Reserve announced a 50 basis point cut to the federal funds rate target range, bringing it down to between 4.75% and 5%. This marked the first rate cut by the Federal Reserve since March 2020.
