Barclays and BNP Paribas expect the U.S. Federal Reserve to make a 25-basis-point interest rate cut in September, according to notes dated Friday, citing Chair Jerome Powell's shift in tone at Jackson Hole toward rising risks in the labor market.

The long pause between rate cuts could be particularly bullish for equities, potentially extending and broadening the stock market’s rally, analysts said.

Federal Reserve chairman Jerome Powell signaled a possible interest rate cut in the months to come, sending stocks sharply higher.