Analysts at Wells Fargo predict that the Federal Reserve will make significant adjustments to monetary policy, with the Federal Open Market Committee (FOMC) expected to cut interest rates by 50 basis points at its meetings on September 18 and November 7 respectively.

This new forecast is significantly different from previous expectations and is mainly affected by changes in recent economic data. The weak data has increased market concerns about the health of the economy.

Wells Fargo said the FOMC has made some progress in achieving its goal of restoring inflation to 2%. But analysts noted in Monday's report that "the latest data show that some of the risks to full employment in the Fed's dual goals are increasing," noting that job growth has slowed and the unemployment rate has risen, which may be Early signs of labor market weakness.

Wells Fargo believes that the Fed's "current monetary policy stance is very tight," and points out that the FOMC needs to quickly return to a neutral policy stance to avoid a reduction in consumption caused by a weak labor market, which in turn triggers a cycle of further deterioration in the labor market.

Wells Fargo expects the federal funds rate target range to be lowered to 3.25% to 3.50% by mid-2025, an estimate that is consistent with the neutral interest rate view of many experts in the market. They foresee a series of interest rate cuts in the future, including an expected 25 basis point rate cut in December 2024, and another 25 basis point rate cuts at the January, March and June 2025 meetings.