Kay Herr, Chief Investment Officer for Global Fixed Income, Currency and Commodities at J.P. Morgan Asset Management, believes that market expectations for the Federal Reserve's rate cut magnitude this year are reasonable. Current market expectations suggest the Fed will cut rates by approximately 25 basis points in September, with total cuts of around 70 basis points from now until year-end.

"The market is now expecting nearly three rate cuts, which feels reasonable," Herr said in a Friday interview.

She indicated that policymakers may leave room for both further rate cuts and maintaining the status quo throughout the year, while closely monitoring subsequent data.

Herr pointed out that services price growth will be a key focus in the August inflation data to be released next week.

"The Fed can ignore inflationary pressures in the commodities sector because we can attribute that to one-time price increases from tariffs. But if there are persistent inflationary pressures in services, that would be much harder to ignore," she noted.

In Herr's view, "concerns about the demise of American exceptionalism are overstated" because there are no real alternatives to the U.S. Treasury market and the dollar.