Last week set of data on US employment were a watershed moment in Fed’s desire to have a soft landing which would have been a historical feat. With employment conditions worsening significantly, Fed’s dual mandate is very much on focus. We doubt that Fed will either do an intra meeting cut or even a sequence of 50 bps cut. Inter-meeting cuts are reserved for crisis situations in which there is risk that the economy and financial markets freeze up, in our view. The July NFP does have some noise element in it but the broader weakening in labour market is there for all to agree. Hence, we believe that Fed might want to get more confirmation from other data such as Aug NFP before going for a 50-bps cut in the Sep meeting. We believe Fed might decide to gradually cut by 75 bps in REMCY24, 25 bps in each of the remaining 3 meetings.
