After the non-farm payroll report, three Federal Reserve officials have expressed concerns, and the probability of a rate cut in September has significantly increased

Three Federal Reserve officials expressed new concerns about the latest signs of weakness in the U.S. labor market, significantly enhancing market expectations for a rate cut as early as September.

On Wednesday, San Francisco Fed President Mary Daly clearly stated that to prevent further deterioration in the job market, policy adjustments may be needed in the "coming months."

Previously, Wall Street Journal mentioned that Fed Governor Cook and Minneapolis Fed President Kashkari voiced that weak employment data is shaking the policy balance within the Fed.

These statements were a direct response to last week's non-farm payroll report, which showed that U.S. job growth in July fell far short of expectations, with data from the previous two months being significantly revised downwards, and the unemployment rate also rising. Fed Governor Cook described the data revisions as a typical characteristic of an economic "turning point," further intensifying market speculation about rate cuts.

After these officials made their comments, investor expectations for the Fed to initiate rate cuts at the September meeting quickly heated up. Previously, the FOMC decided to maintain interest rates at current levels during its meeting at the end of July, while the latest dovish remarks suggest that there may be a significant shift in policy stance at the next meeting.

Intensive Release of Dovish Signals

The statements from the three Fed officials on Wednesday provided the clearest signal of a policy shift to the market so far.

San Francisco Fed President Mary Daly stated in a speech prepared for an event in Alaska:

The labor market has shown signs of weakness, and I believe any further slowdown in employment will be concerning.

She added:

All of this means that we are likely to need to adjust policy in the coming months.

Meanwhile, Minneapolis Fed President Kashkari expressed similar concerns in a media interview, noting that the economy is slowing down. Kashkari stated:

In the short term, a rate cut may be appropriate.

He also reiterated that he expects the Fed to cut rates twice before the end of 2025.

Fed Governor Cook interpreted deeper meanings from the data itself. She pointed out:

The significant downward revision of data from previous months in the July employment report is, to some extent, a typical characteristic of an economic turning point.

This statement suggests that decision-makers have begun to prepare for a potential economic turning point.

Balancing Policy Shift and Inflation Risks

Despite the increasingly clear signals for rate cuts, the officials' remarks also revealed that the Fed is still cautiously weighing its dual mandate: controlling inflation and achieving full employment.

Mary Daly stated that adjusting interest rates is to "recalibrate" policy to better match the risks of inflation and unemployment, she believes that these two are currently "roughly balanced."

Even so, Daly emphasized that to fully cool inflation to the 2% target, the Fed still has more work to do She also mentioned that tariffs will drive up prices in the short term, but their impact may not be significant enough to require a policy response from the central bank.

Earlier this week, Daly stated that two rate cuts this year might be appropriate, but there is also the possibility of more than two rate cuts, leaving room for more aggressive easing policies.