Equity markets (^DJI, ^IXIC, ^GSPC) are expecting the Federal Reserve to cut interest rates at its September FOMC meeting, but the magnitude of this cut remains uncertain. The decision heavily depends on the labor market and August’s jobs report scheduled for Friday release.

Citi Chief US Economist Andrew Hollenhorst joins Market Domination to discuss his outlook on jobs data’s influence on the Fed’s rate cut.

Hollenhorst is forecasting a 50-basis-point cut, noting that the labor market is weaker than many are suggesting. He points to the unemployment rate, which remains elevated, stating, “The unemployment rate didn’t just move up in July, it’s been moving up for the better part of six months or longer now.” He expects Friday’s data to further indicate a weak labor market, without any major external factors like weather influencing the results.

“It’s really going to be pivotal for the Fed where exactly that number comes in,” Hollenhorst explains, outlining three reasons why the labor report could give the Fed room to cut rates: labor market conditions are loosening, inflation has slowed, and policy rates are above 5%.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith