(The Center Square) – This week’s main event is the Federal Reserve’s September meeting, where the central bank is widely expected to deliver its first rate cut. Despite the Fed chair’s dovish tone in Jackson Hole, markets had placed the probability of a 50 basis point rate cut in September at just 30%. Now, that probability has shifted to a toss-up. Traders expect the fed funds rate to fall by 125 basis points by the end of the year. That ‘s an additional 50 basis points lower than the FOMC’s median forecast for the end of this year.

With employment growth slowing, economic growth is also expected to decelerate. Households are likely to save a larger share of their income as concerns about job security and future consumption grow. As households attempt to smooth their consumption over time, current spending is expected to decline. Businesses, facing reduced consumer demand, may cut output and potentially lay off their least productive workers – at least, that’s how the scenario typically unfolds.