Wells Fargo warns investors of slowing job growth, creeping inflation as July rate cut talks pursue

Wells Fargo, author of its renowned U.S. Economic Outlook report sent a warning to investors and economists of pursuing a July rate cut as job growth slows and inflation increases.

Wells Fargo building, Alexahire.in.

On Thursday, Wells Fargo analysts released its updated report as the second fiscal half of the year commenced. "We expect payroll growth to average ~50K per month through the rest of year," the company stated in the report. This is much lower in comparison to the average of 130,000 created jobs per month in the first half of 2025 using nonfarm payrolls, and the 164,000 jobs made in the same period of 2024.

Wells Fargo also anticipates inflation to creep up over the next six months as the Trump administration begins to roll out new tariff rates. They expect for inflation increases to prevent companies from continuing to shield their consumers from further price hikes.

President Trump recently threatened a 50% tariff on goods imported from Brazil, as well as a 25% tariff on goods from South Korea and Japan, with his unpredictability still leaving the door open for even more tariff rates to be announced over the next few months.

The deadline for these tariffs' implementation is stiffly on August 1st, with the president so far not wanting to extend it, pressuring early trade negotiations to happen.

President Trump (left) and Secretary of Commerce Howard Lutnick (right).

Wells Faro noted, "We expect the core PCE deflator to rise to 3.1% year-over-year by the fourth quarter. After tariff-related adjustments this year, goods prices will likely rise less markedly in 2026, allowing the core PCE deflator to subside to 2.4% by the end that year." 

With all of these risk factors, Wells Fargo believes there to be rate cuts at the end of the year. "We still expect three 25 bps rate cuts at the September, October and December FOMC meetings this year," Wells Fargo noted.

They cited concerns for the labor market which, although remained quite resilient in the first half of 2025, isn't likely to continue holding the same level of success. Although a rate cut probably won't happen in July, rate cuts later in the year or next year may be likely to expand job growth, through greater availability of loans for companies that have been previously limited from them due to high rates.