Barclays And BNP Paribas Update Forecast
Barclays and BNP Paribas have updated their predictions regarding the Federal Reserve’s interest rate policy following remarks by Fed Chair Jerome Powell at the Jackson Hole symposium. Both institutions now expect two rate cuts this year, with Barclays predicting these cuts in September and December, whereas BNP Paribas had previously not expected any rate cuts at all this year.
This change reflects a shift in how market analysts understand the Fed’s approach to monetary policy, following Powell’s recent speech. Market participants are now awaiting the US jobs report on September 5, which will likely be influential in assessing the chances of these projected rate cuts.
We are reminded of this time last year, following the 2024 Jackson Hole meeting, when a consensus formed around an imminent dovish pivot from the Federal Reserve. Major banks shifted their forecasts, anticipating rate cuts before that year was over. The lesson we learned, however, was that those cuts did not happen in 2024, with the first reduction only arriving in March of 2025.
Caution And Uncertainty
This history teaches us to be cautious about positioning for a specific direction based on Fed commentary alone. Today, we face a similar period of uncertainty with the Fed funds rate holding in the 4.75% to 5.00% range. The latest CPI data for July 2025 showed a slight reacceleration in inflation to 2.8%, complicating the outlook for any further easing.
At the same time, the labor market is showing signs of softening, with the unemployment rate drifting up to 4.1% and job growth slowing to a pace of 175,000 last month. This conflicting data creates a perfect environment for a policy surprise. The most prudent response in the coming weeks is not to bet on direction, but to trade the potential for a sharp move itself by buying volatility.
We should be looking at derivatives that profit from a significant price swing, regardless of whether it is up or down. Options strategies on SOFR futures, for instance, could be structured to benefit from the market’s reaction to the upcoming September 5th jobs report. This allows us to position for the event without having to correctly guess the Fed’s ultimate decision.
