Rick Leader, the chief investment officer of BlackRock’s global bonds, said the gloomy employment report in July opened the door to jumbo fee reductions next month from the Federal Reserve. “We’ll claim that the evidence needed to justify the cuts has arrived in today’s report in September,” the leader told client in a note Friday afternoon. “If labor slack is built at all, or if employment rates below 100,000 continue to be sustained, the Fed is expected to be able to cut 50 base points in September as data evolves.” Next month’s half point cut reflects the Fed’s move, which began its easing cycle with a large-scale cut in September 2024. His comments came after showing that the labor market has suffered a significant slowdown in the past few months. Payroll increased by only 73,000 in July, much lower than Dow Jones estimates 100,000 profit. Worse, the total over the past two months has been revised to a total of around 260,000. Following weak reporting and dramatic revisions, Futures Traders raised the possibility of cuts at its September meeting to around 83% from 40% on Thursday, according to data from CME Group. Still, the leaders have entertained the possibility of a half-cut next month, but the futures market is now allocating zero opportunities. “Today’s report provides the evidence the Fed needs to make rate adjustments in September, so the only question is how big it will be,” the leader said. BlackRock manages $3.1 trillion in bond assets on behalf of its clients. The Fed maintained benchmark interest rates in the range of 4.25% to 4.50% earlier this week, with two members opposed the move. Federal Reserve Chairman Jerome Powell said there has been no decisions made at the September meeting on how the central bank will proceed, adding that policymakers must wait and see the effects of tariffs before they can proceed.
