Payroll Suggests Fed Rate Cut in September

August was marked by mixed signals in the U.S. economy, with weak job data, resilient consumer spending, and growing expectations of a Fed rate cut. In this video, Marcio Brito, Head Investor at Banco Itaú International, analyzes the month’s key highlights and what to expect for September.

The July jobs report in the United States came in well below expectations, with only 73,000 new jobs created. Additionally, figures from previous months were revised downward, bringing the quarterly average to around just 35,000 new positions.

Despite this, weekly jobless claims have proven to be more reliable, given the declining response rate to the monthly employment survey.

Even with a weaker labor market, American consumers have kept spending, driven by early purchases ahead of potential tariffs and typical summer-related consumption.

Inflation remains in focus: the CPI came in as expected, the PPI surprised to the upside, and the Core PCE rose 0.3% in the month, reaching 2.9% over 12 months.

This scenario strengthens the case for a potential rate cut.

At the Jackson Hole symposium, Fed Chair Jerome Powell clearly indicated that rate cuts are on the table if the data continues to support it.
Markets responded positively: the S&P 500 hit new record highs, closing August up 1.9% and accumulating nearly 10% gains in 2025. Treasury yields fell, the dollar weakened, and gold rose 3.5% on expectations of a more accommodative monetary policy.

Oil experienced significant swings in August, ending the month down between 8% and 9%. The decline reflected uncertainty around global demand, especially due to weaker data from China and Europe, as well as ongoing geopolitical tensions in the Middle East. Expectations of a U.S. interest rate cut also weighed on prices, signaling a potential economic slowdown ahead.

President Donald Trump’s attempt to remove Fed Governor Lisa Cook sparked strong reactions. Accused by Trump of mortgage fraud, Cook responded with legal action, claiming the move was unlawful. The standoff raised concerns about the independence of the U.S. central bank, particularly at a time when monetary policy decisions are critical for market stability.

In Asia, stock markets declined slightly, reflecting caution ahead of U.S. data releases.
In the UK, the industrial sector contracted once again, while in the eurozone, factories began to show signs of stabilization.

• Payroll (Sep 5): if data is weak again, the likelihood of a Fed rate cut increases.
• Inflation (CPI – Sep 11): a result in line with expectations would reinforce the case for a cut.
• Fed Meeting (Sep 17): markets are already pricing in nearly a 90% chance of a 25-basis-point cut.
• Trump vs. Lisa Cook: political tension could impact perceptions of Fed independence.
• Global Central Banks: decisions in Europe and Asia may also influence market sentiment.

August brought a mix of weak employment data, resilient consumer spending, controlled inflation, and clear signals of potential rate cuts.
With the S&P 500 on the rise and markets optimistic, September is shaping up to be a pivotal month for U.S. monetary policy.