Even more arguments for interest rate cuts by the Fed? - Commerzbank

Pressure is not only rising from the side of the US administration, calling for aggressive rate cuts. There are also increasing voices within the FOMC and the Board of Governors for interest rate cuts. If Fed Chair Jerome Powell is now also considering interest rate cuts after the latest weak US labor market report, even more as so as the revision of labor market statistics at the beginning of September may worsen more strongly the figures retroactively, he could use next week's conference in Jackson Hole to prepare the market for this, Commerzbank's FX analyst Antje Praefcke notes.

Market is likely to keep a close eye on manufacturing output and retail sales

"It would not be the first time that decisive changes in monetary policy have been announced at Jackson Hole. However, a signal from Powell would be more of a confirmation of market expectations than a change in monetary policy. After all, the market is expecting three interest rate cuts by the Fed by the end of the year while our economists are assuming two. In this respect, it will depend more on the further course of monetary policy. In my opinion, such statements would therefore be even more important than comments on the short-term development of the key interest rates."

"I think that, in addition to the inflation figures (including today's PPI figures) and the labor market data at the beginning of the month, other macroeconomic data from the US will also become increasingly important. Quite simply because the market is likely to try to assess the extent to which US tariffs could affect not only prices but also corporate activity."

"After all, the initial reaction of many US companies is likely to be to absorb a large part of the price increases induced by the tariffs from their own margins before they are ultimately forced, for economic reasons, to pass them on to consumers almost entirely or even in full. Consumers, in turn, may then be less willing to spend money as a result of rising prices. And once consumers in the US lose their appetite for shopping, a decline in economic activity is usually inevitable. The market is therefore likely to keep a close eye on data on manufacturing output and retail sales, for example, in the coming months in order to identify any signs of a slowdown in US growth as early as possible. This could give expectations of interest rate cuts in 2026 another significant boost and put downward pressure on the dollar."