“We think the August labour-market data has opened the door to a ‘catch-up’ 50-basis point rate cut at the September FOMC meeting just as it did this time last year,” strategists John Davies and Steve Englander wrote in a note.

They previously anticipated a quarter-point reduction.

“We recognise that we are moving early, but we expect preliminary revisions to employment data for April 2024 to March 2025 (due next week) to support our 50-bps call,” they said.

Still, the strategists expect that sticky inflation and fiscal easing will limit the scope for further rate cuts beyond September.

Interest-rate swaps show traders have fully priced in a quarter-point reduction at the Sept 16-17 policy meeting, with a small chance of a larger cut.

Economists at Bank of America forecast two Fed cuts this year – in September and December, scrapping what had become an outlier call for no action until 2026.

Among major Wall Street banks, only Bank of America wasn’t already forecasting a September easing.