Fed's Latest Move Sparks Debate Amid Sharp Job Market Downturn

U.S. central bankers are second-guessing their decision to hold borrowing costs steady after a report showed a significant job market slowdown with only 114,000 jobs added in July. Analysts speculate that the Fed will implement substantial rate cuts in upcoming meetings to prevent a severe economic downturn.

U.S. central bankers are now reconsidering their recent decision to maintain borrowing costs after a government report revealed a sharp slowdown in the job market in July. The Labor Department stated employers added just 114,000 jobs, and the unemployment rate climbed to 4.3% from June's 4.1%, indicating an unexpected deterioration.

On Wednesday, the Federal Reserve had opted to keep its policy rate within the 5.25%-5.50% range. Fed Chair Jerome Powell cited an 'ongoing, gradual normalization' of the labor market that delayed rate cuts. Brian Jacobsen, chief economist at Annex Wealth Management, suggested Powell might have cut rates had he known the latest data.

Analysts and traders predict the Fed will now cut rates by half a percentage point at their September meeting, with further cuts expected. Wall Street banks revised their forecasts, with Goldman Sachs and Citi predicting consistent future rate cuts. The sluggish job growth has sparked worries that the Fed delayed too long and now faces a significant challenge to stabilize the economy.

(With inputs from agencies.)