The three-day stock market rout roiling Wall Street is prompting some experts to question whether the Federal Reserve could enact an emergency rate cut before its September meeting. 

The speculation is arising in the wake of the Fed’s July 31 meeting, when the central bank decided to keep its benchmark rate steady at its highest point in 23 years. At a press conference that day, Fed Chair Jerome Powell said while he and other officials were carefully watching the labor market for signs of weakness, they wanted to see more evidence that inflation was cooling before cutting rates. 

But on August 2, the monthly jobs report came in much weaker than expected, sparking fears that the U.S. economy may be fraying under the weight of high borrowing costs and that the Fed has waited too long to cut rates. A few other weak economic reports have added fuel to those worries about the economy, igniting a three-day rout that’s caused the S&P 500 to shed 6% of its value since July 31. 

Given the dim economic data, some analysts and investors said they believe the Fed should undertake an emergency cut before their next rate decision, scheduled for September 18.

“Some analysts are even suggesting an intra-meeting emergency cut is warranted,” noted Seema Shah, chief global strategist at Principal Asset Management, in an email. 

What are the odds of a Fed emergency rate cut?

Traders are signaling a roughly 60% likelihood of an emergency 0.25 percentage point cut within one week, according to Bloomberg News. 

But some experts said they believe the odds are much lower, with Pantheon Macroeconomics noting that overnight index swap rates implied that investors on Monday saw a roughly 30% chance the Fed could make an emergency cut in the next week. 

Chicago Federal Reserve President Austan Goolsbee on Monday told CNBC that if there’s more deterioration in economic conditions, “we’re going to fix it.” But he added that even though the jobs numbers were weaker than expected, he doesn’t believe the U.S. is in a recession.

What is the history of Fed emergency rate cuts? 

The Fed has cut rates at nine emergency meetings in the last 30 years, which means an intra-meeting cut before September “would not be unprecedented,” Pantheon noted. 

The last emergency rate cut was in March 2020, when the economy was free-falling due to the coronavirus pandemic, which shuttered businesses across the globe. 

“Intra-meeting cuts have typically only happened in the event of financial crisis,” Shah noted. 

That was echoed by Pantheon, which noted that “economic and market conditions usually have been worse than now to trigger an emergency Fed meeting.”

Do economists see an emergency rate cut as likely? 

While the markets are pricing in the chance of a rate cut, many economists believe the Fed is likely to wait until its September meeting to start easing borrowing costs, partly as the S&P 500 and Dow Jones Industrial Average remain in positive territory despite the three-day rout.

“We think [Powell] will opt to wait until September, provided markets stabilize,” Pantheon’s economists wrote in a research note. “The Fed probably will place little weight on the drop in stock prices, as the main indexes still are higher than at the start of the year.”

And cutting rates in an emergency meeting might undermine confidence in the economy, Amanda Agati, chief investment officer of PNC’s asset management group, told CBS MoneyWatch. 

“From our perspective, this isn’t the environment when you want to hastily throw a rate cut out there,” Agati said. An emergency cut could do “more damage than it helps because then the everyone will say, ‘What does the Fed know that we don’t?'”