Federal Reserve's Rate Cuts: Timing and Size Under Scrutiny

The Federal Reserve's anticipated shift in policy has financial markets focusing on the size rather than the timing of expected interest rate cuts. Fed Chair Jerome Powell indicated that a cut could come as soon as September if economic data supports it, especially considering the upcoming labor market reports.

Powell remarked that a rate cut is 'on the table,' contingent on ongoing labor market normalization, but not greater than the typical quarter-percentage-point changes. A weaker labor report could prompt a more significant rate reduction, although Powell suggested no immediate plans for such an action.

Market expectations have escalated, with interest rate futures indicating a growing belief in a substantial Fed response before year-end. Economists remain divided, with some predicting gradual cuts while others foresee more aggressive measures if labor and inflation data continue to shift.

(With inputs from agencies.)