Powell’s Dovish Remarks Strengthen Case for October Rate Cut, Says JPMorgan
The Federal Reserve is expected to deliver its second interest rate cut of the year at its meeting later this month, according to JPMorgan. The forecast follows Fed Chair Jerome Powell’s latest comments highlighting a weaker labor market and the potential risks of delaying monetary easing.
Powell Signals Softer Labor Conditions
Speaking at an economics conference in Philadelphia on Tuesday, Powell warned that the U.S. job market faces “significant downside risks.” He noted that both labor supply and demand have “declined quite sharply,” suggesting that the economy may be cooling faster than expected.
Fed Hints at End of Quantitative Tightening
Powell also indicated that the Federal Reserve may soon end its quantitative tightening (QT) program — the process of reducing its bond holdings and shrinking its balance sheet. This shift is seen as a step toward a more accommodative monetary policy.
Since 2022, the Fed has reduced its balance sheet from nearly $9 trillion to around $6.59 trillion, mainly by letting maturing assets roll off without replacement. Powell said the Fed plans to halt QT once reserves are “somewhat above the level consistent with ample reserve conditions,” adding that this threshold is approaching soon.
“We may reach that point in the coming months,” Powell said, noting that the Fed is monitoring a wide range of indicators to guide its next move.
Markets Price In October Rate Cut
JPMorgan said Powell’s dovish tone “solidified expectations for further rate cuts, starting at the next meeting on Oct. 28–29.”
The bank noted that the speech offered strong confirmation of the Fed’s intent to ease policy again this year.
Market tools such as the Fed Rate Monitor now show that an October rate cut is fully priced in, reinforcing investor confidence that monetary policy will turn looser in the weeks ahead.
