Quarterly growth of 12% for Bechtle in Munich, city faces renewed strain
In the financial world, there is growing anticipation that the Federal Reserve (Fed) will cut interest rates as early as September 2025. Market odds for a cut have risen sharply, with over 80%-96% probability based on recent economic data, particularly softer job growth and cooling inflation reports.
The labor market has shown signs of weakness, with July 2025 payroll growth significantly below expectations. Prior months' gains have been revised sharply downward, indicating a substantial slowdown in hiring. This weak jobs data has increased pressure on the Fed to ease monetary policy to support employment.
Inflation readings have also cooled, with July showing a softer headline Consumer Price Index (CPI). However, inflation pressures remain partly "sticky," driven by service sectors rather than easily influenced goods prices. This complicates the timing and scale of any cut.
Markets are pricing in a very high probability of a rate cut, with some analysts and officials suggesting even a 50 basis-point (0.5%) cut given the unexpectedly weak labor market and inflation signals. Others caution that unless the job market deteriorates further, the Fed may hold back or opt for a more modest cut.
If the Fed does decide to cut rates in September, the immediate response from financial markets is likely to be positive, with stock indices rallying on expectations of easier financial conditions and reduced borrowing costs. Lower mortgage rates, business loans, and consumer credit costs may provide a modest boost to demand in the housing and consumer spending sectors.
However, there is some risk that cutting rates too soon could allow inflation to re-accelerate, especially if wage pressures persist. The Fed will need to carefully monitor this situation.
Meanwhile, in the German market, Bechtle, a leading IT company, saw a 11.9% increase in the MDax, reaching 41.28 euros by midday on Friday. Despite expectations of a decline following Cancom's disappointing results, Bechtle has confirmed its full-year forecast and expects a recovery in the second quarter.
Robert Greil, chief strategist at Merck Finck, predicts that the Fed's resistance will break, leading to an interest rate cut in September. He also expects this trend to gain even more momentum in August based on corporate statements. The Dax, the German benchmark index, ended the week positively, gaining more than 3%. The Dax is now targeting its all-time high of 24,639 points.
Sources: [1] CNBC [2] Reuters
Investing in stocks might see an uptick if the Federal Reserve (Fed) cuts interest rates in September 2025, given the high probability of such a move due to the weak labor market and cooling inflation reports. However, the extent of the cut could be influenced by the Fed's desire to balance the need for employment support with the risk of inflation re-acceleration. On the other hand, the business sector, such as Bechtle in the German market, may capitalize on easing interest rates for improved borrowing conditions.
