Birgit Henseler, analyst at the Bundesbank, said money markets were still divided on whether the Fed would cut interest rates for the first time by 25 basis points to 50 basis points, but there were several reasons why the Fed should not take a major step. "Neither labour market data nor recently published inflation rates suggest a need for a significant rate cut," she said in a note. Henseler said labour market conditions pointed to a slowdown rather than a recession, while core inflation had recently proved more stubborn than many market participants had expected, due to rising costs for housing and other services.