Deutsche Bank-Fed Watcher Jury still out on September rate cut, but 50bps...-117325896

2025 18:45:04 GMT2025 18:45:04 GMTResearchDeutsche Bankamy.yang@db.comAmy Yang | (+1) 212 250 9959 | amy.yang@db.comFed Watcher: Jury still out on September rate cut, but 50bps definitely outDeutsche 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 Avik ChattopadhyayResearch Associateavik-a.chattopadhyay@db.comAugust 18, 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.ResearchDeutsche Bankamy.yang@db.comAmy Yang | (+1) 212 250 9959 | amy.yang@db.comAugust 18, 2025DB Fed Watcher: Jury still out on September rate cut, but 50bps definitely out2Fedspeak Who**TakeawaysBias*Schmid [5] (08/12)▪ Appropriate to retain a modestly restrictive policy. Favors patience▪ Current policy not far from neutral▪ See continued resilience. Close to meeting dual mandates for a while▪ Labor market close to balance, inflation remains too high▪ Limited tariff inflation effects supported holding rates than easing▪ Not for “wait-and-see” approach, impossible to disentangle persistent tariff effects vs. temporary over the next few months. Ex-tariff inflation is neither meaningful nor measurable▪ Data dependent. Will adjust views if demand weakened significantlyDaly [3] (08/14,15)▪ Support a Sept. rate cut▪ Labor market no longer solid. While it is not bad, the direction of change is worrying. Can’t ignore softening▪ 50bps cut send an unnecessary urgency signal. No need to catch up▪ Policy too restrictive, need recalibration. Favors gradual adjustment over next year or so▪ Saw 2 cuts this year in June SEP. Still a reasonable projection. Open to 3 cuts with more signs of labor market turning, or fewer cuts with signs of serious inflation▪ Muted tariff impacts on goods inflation, suggest diminished risks of inflation expectation unanchoringFedspeak, continuedWho**TakeawaysBias*Goolsbee [1] (08/13,15)▪ Feeling uneasy about judging tariff impacts as one-off▪ Need at least another inflation report to see if inflation was still on track▪ FOMC meetings in the fall are live ▪ Mixed July CPI reports. Services inflation was “bad”. More concerns if getting more reports with non-tariffed components showing higher inflation▪ Labor market still pretty solid, can’t overindex payroll data. Unemployment rate steady▪ See risks to both mandatesBostic [3] (08/13)▪ Still for one cut this year. Predicated on labor market staying solid▪ Can wait with strong labor market▪ Unemployment remarkably low▪ Labor market softened over last 3 months. Trying to decide how much labor market has softenedBarkin [3] (08/12,14)▪ See strong consumption in July▪ 4.2% UR not bad, remarkably stable▪ Balance of risks still unclear▪ Inflation w