In August, the U.S. added only 220,000 nonfarm payroll jobs, and nonfarm employment gains from April 2024 to March 2025 were revised down by 911,000... As recent U.S. employment data shows clear signs of "cooling," market discussions about Federal Reserve rate cuts in September have resurfaced.

However, regarding the magnitude of rate cuts, FedWatch data on September 14th shows that market bets on a 50 basis point Fed rate cut in September remain below 10%, while bets on a 25 basis point cut exceed 90%. So, is it possible for the Federal Reserve to cut rates more aggressively than market expectations with a 50 basis point move?

This analysis suggests that whether the Fed will implement unexpectedly aggressive rate cuts requires comprehensive consideration of three factors.

First, while U.S. employment market data is rapidly "cooling," there has been no large-scale layoff phenomenon, and evidence of imminent recession remains insufficient.

The U.S. unemployment rate in August was 4.3%. Compared to last August when the rapid rise in unemployment triggered the Sahm recession rule, current recession conditions have not yet been triggered. Meanwhile, the Fed's latest Beige Book released in early September shows that among the 12 Federal Reserve districts, 11 regions reported little change in overall employment levels, while 1 region reported a slight decline in employment. Seven districts found businesses were cautious about hiring, mainly due to weak demand or uncertainty about prospects, while contacts in 2 districts reported increased layoffs. For the Fed to cut rates beyond expectations, it would need to see more evidence of accelerated, large-scale corporate layoffs.

Second, while current U.S. inflation data does not impede rate cuts, potential rebound risks cannot be ignored.

Data released by the U.S. Bureau of Labor Statistics on September 11th showed that U.S. CPI (Consumer Price Index) rose 2.9% year-over-year in August and 0.4% month-over-month, both in line with market expectations. Additionally, preliminary survey data released by the University of Michigan on September 12th showed that U.S. consumer long-term inflation expectations rose to 3.9% in September for the second consecutive month. Clearly, potential inflation rebound risks also constrain the Fed from aggressive rate cuts.

Finally, the Fed's current independence has been questioned, and rash aggressive rate cuts would bring additional challenges.

Recently, a series of controversial events have emerged both within and outside the Federal Reserve, and markets have already questioned the Fed's independence. If the Fed were to directly cut rates by 50 basis points beyond expectations at the September monetary policy meeting, it would inevitably trigger greater controversy and have negative long-term effects on dollar credibility. Furthermore, rashly cutting rates by 50 basis points could signal to markets that "the Fed has observed more signs of recession," which could significantly increase market volatility—something the Fed would not want to see.

Therefore, this analysis concludes that if the Fed were to cut rates more aggressively than expected in September, the disadvantages would outweigh the benefits. However, given employment market pressure and temporarily controllable inflation, the possibility of the Fed accelerating its easing pace is increasing. The Fed has three remaining monetary policy meetings this year (September, October, December), and the Fed's rate-cutting path is more likely to involve a 25 basis point cut at the first meeting (September) followed by consecutive cuts at the remaining two meetings (October and December) to address pressures from U.S. economic slowdown.