"Will there be no interest rate cut in July and a significant cut in September"? Market discussion: Is the Federal Reserve "repeating last year"?

An unexpectedly weak employment report is sparking discussions in the market about whether last year's script of "holding steady in July and significantly cutting rates in September" will be replayed. Just after the Federal Reserve announced it would maintain interest rates this week, the non-farm payroll data for July released on Friday showed that the U.S. labor market is cooling at an astonishing pace. The data not only fell far short of expectations, but the significant downward revision of employment figures for the previous two months also revealed the underlying weakness of the economy, putting the Fed's previous wait-and-see stance to the test. In response to this weak employment report, Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, stated: Today's report provides the evidence needed for the Fed to adjust rates in September, so the only question is how much the adjustment will be. According to data from the Chicago Mercantile Exchange, the probability of the Fed cutting rates at the September meeting surged from less than 40% on Thursday to nearly 90%. (The probability of a 25 basis point rate cut in September is as high as 89.6%) Historical Repetition? Market Bets on Fed's "Remedial" Rate Cut The sudden cooling of the job market immediately reminds the market of the Fed's policy trajectory last summer. At that time, the Fed also chose not to cut rates at its July meeting, but the weak employment report released two days later changed the situation. Ultimately, officials made a "remedial" move by cutting rates by 50 basis points (more than the usual 25 basis points) at the September meeting. Before the July Fed rate decision, renowned economist El-Erian had posted a forecast of the Fed's potential rate path: How likely is it that the Fed completely replays last year's pattern? Specifically, the Fed maintains rates in July and then significantly cuts rates in September, even though the economic conditions seem unchanged during this period. Previously, according to Wallstreetcn, well-known financial journalist Nick Timiraos also indicated that the current scenario might evoke a sense of "déjà vu" among Fed officials. However, Timiraos pointed out a key difference between the two situations: Last year, U.S. inflation was in a sustained decline; this year, due to a series of broad tariffs implemented by the Trump administration since spring, Fed officials are concerned that inflationary pressures may rise. Therefore, Timiraos emphasized that the key question facing the Fed is: Is the U.S. economic fundamentals truly deteriorating, or is the recent slowdown merely a temporary phenomenon caused by the lagging effects of certain policies? However, Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, stated in a report to clients on Friday afternoon: If the slack in the labor market worsens, or if new jobs continue to be below 100,000, the Federal Reserve is expected to begin cutting interest rates, and a 50 basis point cut in September is possible. It is worth noting that although Rieder raised the possibility of a significant 50 basis point cut, current futures market prices indicate that traders believe the probability of such an event is zero. Before the September meeting, policymakers will also receive an employment report and two months of inflation data, which will collectively determine whether the Federal Reserve will choose to take a cautious wait-and-see approach or respond to the changing economic outlook with a decisive action like last year.