Renewed worries over the state of the U.S. economy have sparked concerns among Americans that go beyond the recent stock market plunge. Wall Street analysts now predict a series of interest rate cuts starting in September, with experts suggesting that the Federal Reserve may adopt an aggressive monetary policy to prevent a severe downturn.

The recent decline in financial markets, fueled by mounting evidence of a slowing economy, has significantly increased the likelihood of the Federal Reserve implementing substantial rate reductions. Economists, who had initially projected a 0.25 percentage point rate cut at the Fed's September 18 meeting, now overwhelmingly predict a double reduction of 0.5 percentage points, according to FactSet data.

Forecasts from Wall Street analysts indicate that the Federal Reserve may further decrease borrowing costs during its November and December meetings. The majority of predictions suggest that by the end of the year, the benchmark rate could potentially reach as low as 4% to 4.25%, about 1.25 percentage points lower than its current 23-year high.

These larger rate cuts, if implemented, would bring relief to borrowers, including individuals looking to purchase homes and cars, who have been grappling with high financing costs. However, savers would likely experience a downside as high-interest rate savings accounts and certificates of deposit (CDs) may offer less favorable terms following the Federal Reserve's rate cuts.

Although the Federal Reserve typically lowers rates in 0.25 percentage-point increments, it has occasionally made cuts of greater magnitude during times of crisis. For instance, in March 2020, as the economy was being heavily impacted by the COVID-19 pandemic, the Fed implemented emergency rate cuts of 0.5 and 1 percentage point.

Amanda Agati, Chief Investment Officer of PNC Financial Services Group's asset management unit, commented on the current situation, stating, "The market is demanding a lot of rate cuts - and aggressive rate cuts. It's very possible a 50 basis point rate cut is what happens in September, versus the traditional 25."

While some analysts and investors have questioned whether an emergency rate cut could occur before the Fed's scheduled September meeting, it is highly unlikely. The Federal Reserve usually reserves emergency actions for situations where there are broader risks to the financial system or the economy, such as during the pandemic. Moreover, economists argue that the data from the weaker-than-expected August 2 jobs report alone does not warrant an emergency intermeeting rate cut.

Wall Street is currently betting on significant rate reductions throughout the remainder of 2024, with expectations of potential rate cuts persisting until the end of the year. Federal Reserve Chair Jerome Powell mentioned the possibility of a rate cut at the September meeting in late July. However, the weak jobs report has caused economists to reassess the situation.

As the benchmark rate has remained at 5.25% to 5.5% since July 2023, the Fed's last rate hike, financial experts acknowledge that there is enough flexibility for the central bank to support the economy and markets. Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management, forecasts rates to be 1 percentage point lower by year-end, ranging between 4.25% and 4.5%.

Marcelli believes that recent indications of inflation moving back to the Fed's target provide both the incentive and justification for the central bank to act swiftly and bring rates lower than previous expectations.

As the U.S. economy faces mounting concerns, all eyes will be on the Federal Reserve's decisions in the coming months, as rate cuts could significantly impact economic conditions and market stability.