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The futures market is almost fully pricing in that the Fed will cut rates by 50 bps this year (95% implied chances) and continue to anticipate roughly 100 bps worth of rate cuts next year. Markets are certain of a rate cut in September, but are also likely pricing in risks in the event of a Trump’s second term.
In a particularly turbulent environment such as this, it is worth highlighting the calm, rationality, consistency as well as humility with which central banks are implementing their monetary policy.
There is still no clear indication of a severe slowdown in the labor market, though it has weakened more than it initially appears. The slower rate of job creation, coupled with frequent downward adjustments to monthly employment figures, sugge…
Mid- and long-term Treasury yields eased further from their late-April’s highs on a less hawkish than expected Fed in this month’s meeting, and fresh signs that the inflation jump in 1Q will prove transitory.
With the fed funds rate at its peak, growing chances of disinflation resuming in 2Q24 and more balanced risks, the Fed is likely to remain cautious in determining the timing of a first rate cut.
Intermeeting developments will likely not change the already-conveyed Fed message that more good data is needed to gain enough confidence in progress toward 2% inflation; the debate around the policy stance will continue to focus on for how long to keep the fed funds rate at its current level.
In recent weeks, high volatility has been observed in financial variables in the United States and, therefore, in much of the world.
Policy rate expectations and Treasury yields eased from their late-April’s highs on softer employment and inflation data released recently.
In a context of a strong economy and a lack of further progress on inflation in recent months, the Fed unequivocally signaled that it can be patient and will give the restrictive monetary policy stance more time to do its job before deciding to…
Financial markets’ expectations on the future path of monetary policy have shifted significantly. While it will evidently take longer than expected to gain confidence on the path to 2%, the Fed is unlikely to rule out rate cuts this year.
A third-in-a-row 0.4% MoM core CPI inflation reading for March following strong jobs reports added to a series of hot data that suggest a rate cut soon is off the table amid increased odds for less than three rate cuts this year.
The Fed appears to have achieved a better balance of risks around its dual mandate of price stability and maximum employment. This suggests that it will soon begin to normalize its policy stance, probably in June, although it will proceed cautiously even after that.
