02:00 PM EDT, 08/09/2024 (MT Newswires) -- The Federal Reserve is expected to lower its benchmark lending rate by half a percentage point next month, followed by "a series of" 25-basis-point cuts amid recent recession concerns and financial market turmoil, ING said Friday.

Late last month, the central bank's Federal Open Market Committee left interest rates unchanged at 5.25% to 5.50%, its eighth straight pause. Policymakers started tightening monetary policy in March 2022 to tame inflation, with their last rate hike coming in July 2023.

A weaker-than-expected jobs report released Friday fueled recession fears and triggered a stock market sell-off.

ING said it now expects a 50-basis-point interest-rate cut in September, followed by "a series of" 25-basis-point moves, taking the Fed funds rate to around 3.5% by next summer, according to a report co-authored by ING Research Global Head of Macro Carsten Brzeski. Markets are currently pricing in a roughly 52% probability that policymakers will deliver a 50-basis-point cut Sept. 18, down from 74% a week ago, according to the CME FedWatch tool.

"Our most recent change in the spring was to scale back our view to a mere (75 basis points) of cuts in the second half of the year, which appears to have been the wrong thing to do," Brzeski wrote. "Instead, we see the Fed acquiescing to some of the market worries and implementing at least one, perhaps two (50-basis-point) moves to get them on track to moving policy to a more neutral footing quickly."

As recently as June, Fed policymakers were projecting the US economy to grow 2.1% on an annual basis in the fourth quarter and an unemployment rate of 4% by the end 2024, with the need for "perhaps only one" rate cut in 2024, according to the report. "That looked optimistic even then, but with business surveys softening, hiring rapidly cooling, inflation tracking towards 2%, and unemployment blowing past their projections, the Fed certainly can argue that it should move sooner than previously thought."

ING expects US real gross domestic product to grow 2.5% this year and 1.5% in 2025. The 2026 growth rate is pegged at 2.1%, according to the report. An advance estimate by the US Bureau of Economic Analysis showed last month that real GDP rose 2.8% in the second quarter, accelerating from 1.4% growth in the previous three-month period.