🚨If the unemployment rate is 4.3%, Fed will cut by 50bps: Citi 🏦

Citi economists suggest that if the U.S. unemployment rate remains at 4.3%, the Federal Reserve is likely to implement a 50 basis points (bps) rate cut at its September meeting. If the rate drops slightly to 4.2%, the Fed may opt for a smaller, 25bps cut, unless there are signs of labor market weakness, such as softer payroll growth. Citi estimates that 125,000 new jobs, adjusted for recent payroll revisions, would need to align with a 4.2% unemployment rate for a larger cut.

Other labor market indicators, such as the rise in permanent unemployment or increased layoffs, could also justify a more aggressive cut. The upcoming jobs report will be crucial in determining the rate cut's size. Federal Reserve Chair Jerome Powell indicated that rate cuts are likely soon but stressed that decisions will depend on evolving economic data and risks.

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