Market at all time highs. Real Estate at all time highs. Inflation seems to be lower but CPI still high af. Also don't want to cut too fast. I see 25 basis point cut.
The market is now strongly leaning towards a 25 basis point cut in September. What a bigger-than-expected Fed rate cut would mean for the stock market https://finance.yahoo.com/news/what...ould-mean-for-the-stock-market-181143568.html Hotter-than-expected readings on consumer prices — and on some wholesale prices — over the past two days have led markets to price in a higher likelihood that the Federal Reserve will opt for a smaller, more conservative interest rate cut at its September meeting. A bigger reduction could send stocks reeling. As of Thursday, investors were placing the probability of the Fed lowering rates by 50 basis points at its meeting next week at just 15%, down from the 44% chance seen a week prior, per the CME FedWatch Tool. Some strategists have said that a 25 basis point cut would be a more welcome sign from the Federal Reserve. Yardeni Research chief markets strategist Eric Wallerstein reasoned the Fed likely wouldn't cut by more than 25 basis points "absent recessionary conditions or a financial crisis emerging." "For everyone who's asking for a 50 basis point cut, I think they should really reconsider the amount of volatility that would cause in short-term funding markets," Wallerstein told Yahoo Finance. "It's just not something the Fed wants to risk." To Wallerstein's point, while the most recent jobs report showed continued signs of slowing in the labor market, economists largely reasoned it didn't reveal the substantial cooling that many believed would be needed to prompt a deeper cut from the Fed. The risk is that significant deterioration in the job market indicates a recession. Meanwhile, Wednesday's Consumer Price Index (CPI) report showed that on a "core" basis, which strips out the more volatile costs of food and gas, prices in August climbed 0.3% over the prior month, above Wall Street's expectations for a 0.2% increase. "The unwelcome news on inflation will distract slightly from the Fed's renewed focus on the labor market and makes it more likely that officials stick with a more measured approach to easing, beginning with a 25 [basis point] cut next week," Oxford Economics deputy chief US economist Michael Pearce wrote in a note to clients on Wednesday. Some on Wall Street have also pointed out that a 50 basis point interest rate cut could create a more ominous sign about the health of the US economy than the central bank would like to portray. "A 50 basis point cut would reek of panic, and it's almost like we're totally behind the curve at this point," Jennifer Lee, BMO Capital Markets senior economist, told Yahoo Finance. DataTrek co-founder Nicholas Colas analyzed each Federal Reserve rate-cutting cycle since 1990. Among the five cutting cycles over that time period, both times the Fed began its cycle with a 50 basis point cut (in 2001 and 2007), a recession soon followed. "While the data here is sparse, there is something to be said for associating an initial cut of 25 basis points with a midcycle policy correction and 50 basis point as signaling the Fed is too far behind the curve to avoid a recession," Colas wrote in a note to clients on Wednesday morning. "Chair Powell and the rest of the FOMC certainly know this history. Their first cut will almost certainly be 25 basis points." As of Wednesday morning, markets are expecting 100 basis points of cuts from the Federal Reserve this year. More clues on the Fed's thinking will come on Sept. 18 when the Federal Reserve releases its Summary of Economic Projections, including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future. Wallerstein reasoned that if the total amount of Fed cuts this year falls short of the market's expectations, that isn't necessarily a bad thing for stocks. "If those rate cuts get priced out because growth is stronger than expected and GDP comes in strong for the third quarter and the labor market indicators aren't too bad, and we keep seeing consumer spending [increasing], then stocks will have more room to run as earnings continue to grow," Wallerstein said.
Federal Reserve lowers interest rates by 0.50 percentage points in first cut since 2020 https://www.cbsnews.com/news/fed-rate-cut-decision-federal-reserve-interest-rates-september-meeting/ The Federal Reserve on Wednesday said it is cutting its benchmark interest rate by 0.50 percentage points, marking the first reduction in four years and moving to ease borrowing costs as inflation-weary consumers are grappling with high rates on everything from mortgages to credit cards. The Fed said the cut lowers the federal funds rate into a range of 4.75% to 5%, down from its prior range of 5.25% to 5.5%, which had been its highest level in 23 years. The half-point move signals that the Fed is acting aggressively to keep the U.S. economy from stalling, given that historically most rate cuts are 0.25 percentage points. Prior to the decision, some economists had urged the Fed to make a bolder reduction, given signs of weakness in the labor market and a cooling economy. "This is a bit of a surprise," Brian Coulton, chief economist at Fitch Ratings, said in an email. The half a percentage point cut "suggests an abrupt switch of focus back to the maximum employment mandate and a very sharp improvement in confidence in inflation progress in the last month and a half." "The latter is a little hard to understand given the incoming inflation data, and it suggests that the Fed may be more concerned than most about the state of the labor market, where the pace of job creation still looks pretty solid," he added. It is the first drop in the federal funds rate — or what banks charge each other for short-term loans — since the U.S. central bank lowered rates to nearly zero in March 2020 amid an economic standstill caused by the pandemic. But as prices surged during the health crisis, the Fed repeatedly hiked rates in an effort to curb inflation. The economic whipsaw of the past four years has left many consumers and businesses struggling with both high prices and elevated borrowing costs, even as the Fed's rate hikes have helped cool inflation to 2.5% in August on an annual basis, close to the central bank's 2% target. More recently, however, there have been some worrying signs about a slowdown in the labor market, prompting Fed Chair Jerome Powell last month to say "the time has come" to ease rates. In its Wednesday statement, the Fed cited its decision to make a larger cut "in light of the progress on inflation and the balance of risks." "The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the Fed said in the statement. "The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate." The bigger cut signals "the Fed's got the labor market's back," said Sonu Varghese, global macro strategist at Carson Group, in an email. Additional rate cuts in 2024 Even more important than today's cut is what the Fed does in the months ahead as it pivots away from battling inflation to revving up the nation's economic engines in a bid to stave off a downturn. The Fed also released its economic projections for the coming years, which shows that its members are pegging the median 2024 federal funds rate at 4.4%, which would represent about a 1 percentage point reduction from its prior level, financial data firm FactSet noted. Wednesday's cut should ease financial strains for some consumers, experts said. "A September cut, along with the possibility of at least one more this year, should be welcome news to investors," said Joe Gaffoglio, CEO at Mutual Of America Capital Management, in an email ahead of the decision. The rate reduction, "coupled with moderating inflation, should help ease the financial strain on lower- and middle-income consumers." Economists are also forecasting that Wednesday's rate cut will mark the first in a series of reductions this year and into 2025, with many analysts expecting the Fed to also cut its benchmark rate at its November and December meetings, according to FactSet. (The Fed doesn't have a rate meeting scheduled in October.) Next FOMC meeting Powell, who is set to discuss the Fed's decision at a press conference at 2:30 p.m. Eastern Time, had previously come under fire by some economists and policy experts for moving too slowly, both in first hiking rates to address inflation and in holding off on cutting rates as the economy wobbled. The next Fed meetings are scheduled for November 6-7, which will take place after the U.S. presidential election, and December 17-18.
I was surprised TLT went lower. I guess the market believes better growth is ahead. Or its just profit taking from the run up to the rate decision.
Fed Chair Powell says the US economy is in ‘solid shape’ with gradual rate cuts coming https://wtop.com/business-finance/2...is-in-solid-shape-with-more-rate-cuts-coming/
forget what he said yesterday, there will be another 50bps cut by the end of this year. gas price came down significantly so the cpi would probably be in low 2 and high 1. bind prices are going up.