Deutsche Bank-Fed Watcher Labor data boost risks of earlier cut-117199390

2025 19:24:05 GMT2025 19:24:05 GMTResearchDeutsche Bankamy.yang@db.comAmy Yang | (+1) 212 250 9959 | amy.yang@db.comAugust 11, 2025IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Fed Watcher: Labor data boost risks of earlier cutDeutsche BankResearchAmy YangEconomist(+1) 212 250 9959 | amy.yang@db.comMatthew LuzzettiChief US Economist(+1) 212 250 6161 | matthew.luzzetti@db.comBrett RyanSenior Economist(+1) 212 250 6294 | brett.ryan@db.comJustin WeidnerEconomist(+1) 212 469 1679 | justin-s.weidner@db.com Suvir RanjanResearch AssociateSuvir.ranjan@db.comAugust 11, 2025ResearchDeutsche Bankamy.yang@db.comAmy Yang | (+1) 212 250 9959 | amy.yang@db.comAugust 11, 2025DB Fed Watcher: Labor data boost risks of earlier cut2Fedspeak Who**TakeawaysBias*Cook [2] (08/06)▪ Labor market concerning with major downside revisions to payrolls, speaking to economy turning point▪ Unemployment rate still a good indicator of slack▪ Need to look at a broad set of data, be cautious and humbleDaly [3] (08/06)▪ Rate adjustments in coming months▪ Additional slowing of labor market unwelcome▪ Tariffs boost near-term inflation, not persistently▪ More work on inflation. Risks to dual mandates roughly in balance▪ Tariffs, immigration policy changes driving up inflation, reducing workersBowman [1] (08/09)▪ Continues to project 3 cuts this year, consistent with her forecast last Dec ▪ Focus on risks to employment mandate. Diminished upside risks to inflation▪ Even greater confidence in temporary inflation impact from tariff▪ If any, very little ‘second round” tariff effects on inflation in the medium term▪ Deregulation, tax cuts likely improve supply and offset tariff effects on activity and inflationFedspeak, continuedWho**TakeawaysBias*Musalem [4] (08/08)▪ Economic activity is stable. Now missing on inflation not job mandate▪ Risks of missing on both mandates▪ Most likely tariff inflation boost will be short-lived, reasonable probability of it being persistent▪ Labor market in balance, with low unemployment rate▪ Concerned that both labor supply and demand were declining▪ Growth below potential for H1 and expected to continue in H2, posing risks to labor market▪ Low hiring/firing points to fragility of labor market▪ Forward looking, open minded, taking a balanced approach to risks on dual mandatesKashkari [4] ▪ Economy slowing, must respond▪ Still see two cuts this year▪ Don’t know if tariffs’ price impacts will persist, while labor market cooling is clear▪ Tariffs still represent significant uncertainty▪ Prefers to adjust now then pause or reverse, as opposed to merely hold and wait for tariff clarity▪ Could cut fewer times if tariffs’ inflationary effects were persistent* Bias of speech / research for monetary policy: Dovish Neutral Hawkish Summary: Fed officials signaled