The firm also no longer expects a US-China trade deal before the 2020 election

  • Sees a 50% chance of a 25 bps rate cut at the October FOMC meeting
  • "By the December meeting, we think the Fed is likely to stop rate cuts"

I reckon the shift in assumption of a trade deal is a fair one given recent developments but those are some pretty heavy odds of another 25 bps rate cut going into the 18 September meeting decision.

As far as the data suggests, it is a bit uncalled for but the fallout in US-China trade talks will make a rate cut increasingly likely. Fed funds futures have priced in a 100% probability of that scenario with even ~34% odds of the cut being by 50 bps.

Fedspeak in the month ahead is going to be the decisive factor in that regard, as it will be the only plausible way for the Fed to walk back market expectations ahead of the meeting. If they don't, then a 25 bps rate cut would be pretty much in the bag.