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In the span of a week, traders have coalesced around the idea of a September rate cut, spurred on by discouraging labor market data and revisions showing more weakness. While the Fed held rates steady to try and finish its inflation fight, the other side of the central bank's dual mandate is flashing warning signs.

But even as the market abruptly shifted expectations — the probability of a September cut jumping from close to 40% last week to more than 90% Thursday — some prominent observers believe the Fed won't act at all this year.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

In the uneasy context of a stalled labor market, that's a contrarian take. But it's one that draws its power from an inconvenient truth: Inflation is stuck above target.

Despite the labor red flags, Bank of America economist Aditya Bhave doesn't believe the Fed will cut at all this year. His call runs counter to what many other market observers are banking on. And it's a reminder that nothing is guaranteed because so many economic indicators and policy currents (trade, immigration) are in play.

In a note this week, Bhave explained that the Fed's decision not to cut would be influenced by stagflationary pressures. And that, even as the labor market revisions cast an even more negative spin on jobs growth, the Fed is still more offside on inflation compared to labor.

"If it were to cut in September, it would be putting a lot of faith in a forecast of labor market deterioration, with no evidence that inflation has peaked," he wrote.

The market does not agree. As of Thursday afternoon, the CME FedWatch tool, which uses futures data, showed more than a 90% chance of a rate cut on Sept. 17 and just a 0.6% chance of no cuts by Dec. 10.

Bhave's case doesn't seem quite as outlandish when you also consider the Fed's timeline. Policymakers won't meet again for another six weeks, leaving room for another round of mind-changing numbers to complicate or fracture market consensus.

But the no-cut take also comes as more officials inside the Fed have expressed a desire to start slashing. For the first time since 1993, two Fed governors dissented from the decision to keep rates unchanged. And President Trump will have the opportunity to nominate a new Fed official with governor Adriana Kugler's resignation. The person appointed to fill her seat could use the position as a stepping stone to succeed Jerome Powell as the next Fed chair — and at the very least be another dovish voice.

Of course, another wave of unpleasant jobs data could knock down the idea of the Fed holding steady and strengthen the already powerful case to cut. As Bhave noted, tepid inflation figures and a rough August jobs report could change his tune.

But like many hot, contrarian takes, it's not really about the actual take, but about the reasoning and points that underpin it. Namely, in this case: Just as there are risks to acting too late, there are downsides to jumping in too soon. Bhave is pointing out the risks.

A cut designed to preempt a worsening labor market would leave the Fed vulnerable to reaccelerating inflation. And as Powell suggested at the last policy meeting, it's better to be late than wrong. The labor market trajectory suggests further weakening. Bhave's contention, however, is that now is an especially difficult time to rely on forecasts over data in hand.

Observers suspect labor market troubles may soon arrive. But we already know inflation is still stubbornly here.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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