Expectations of another 25 basis point rate cut by the government are strengthening Federal Reservewhich will then take a break, at least until March. This is what emerges from the bets underlying the FedWatch futures, after the publication of the Beige Bookthe usual monthly report on the economy, and after words of President Jerome Powellduring an event at the New York Times, just two weeks before the next FOMC meeting.
Powell, strong economy, more caution
“The US economy is in good shape, inflation has fallen, unemployment is at a low level. We are not yet where we want to be with inflationbut we are very close“, said the President Jerome Powell in his speech at the DealBook conference, recalling “we first raised rates, then we left them unchanged for 14 months and – when other central banks had already cut – we started last too”.
“Now, the economy is in a better position of how it was in September and how we thought – he added – so we can allow ourselves to be more cautious towards a neutral position“, underlined the President, adding “the data received in the meantime, compared to September, showed that the economy is stronger than we thought, that the US economy is really strong”.
Beige Book sees an improving economy
The monthly bulletin on state of the economy in the 12 districts of the Fed (Beige Book) speaks of an economic activity “slightly increased in most districts”.
According to the report, three regions showed modest or moderate growth, which offset flat or slightly declining activity in two others. While growth in economic activity was generally muted, growth expectations increased moderately across most geographies and sectors.
THE business contacts they expressed optimism that demand will increase in the coming months. Consumer spending was generally stable.
Looking at the job market, the Beige Book shows that i employment levels remained stable or increased only slightly in the districts. Recruitment activity was moderate as worker turnover remained low and few companies reported increased staffing. Also the level of layoffs was reported as Bass. THE contacts have indicated that they expect the current pace of price growth to persist, but businesses in several districts have indicated that the tariffs represent a significant upside risk to inflation.
Mini cut in December and then a break
THE FedWatch futureslisted on the CME, therefore signal the possibility of a “mini” rate cut in December, to the extent of 25 basis points, with one 74% chanceup compared to a week ago.
The expectations for the coming months they see the probability of no intervention in the January meeting and a 25-point intervention in March (the probability in this case is 46.4% and is offset by a 35.3% which predicts a second stalemate).
