Should the FED cut the rate on next meeting ? I already said some weeks earlier that the US economy is not in that good shape the FED was talking about and had expected. Now the indicators are clear with the Inflation also coming more down than expected that there should be a rate cut already in the next meeting in my eyes. CPI and PPI came in lower than expected and now Michigan much worse which shows a clear slowdown in the US economy. There is no recession to be expected (yet) but the signs of a slowdown are also clear. The current policy is by far too restrictive with 4.5% which can break the economy when the rates are not cut in the next months. I get the impression that the FED does not understand that they are hurting the US economy too much by such restrictive rates they currently have. I see the neutral rate around 3% or even lower. Also on Polymarket there is a 41% chance now that the US will see a recession in 2025. The FED must act NOW cutting rates. The FED could argue that inflation expectations are way too high. But those expectations are completely wrong as they are based on a full developing trade war with implications on the inflation side. But what we have seen is that Trump only wants to have better Deals so everything is negotiable and such a trade war will never happen in full, so inflation cannot go up (that much) and will go further down in the next 12 months significantly. Also the lower consumer data shows that there is a mismatch with inflation expectations. Because when there is higher inflation expected there should be more products and services consumed, especially when the income has risen that much, recent data has showed. But what is the consumer doing with that extra money when not spending it ? It must be put in one form of savings and investments then. But that will reduce inflation. So there is big mismatch between all those data and one need to look through them. For me it seems the FED is always behind the curve here. What is your opinion on this poll ?
In addition the most recent company earnings releases with their forecasts showed warnings signs too that the US economy is by far not in that good shape the FED was talking about. They also said the 4.5% is not too restrictive and not harming the US economy. The FED is completely wrong here. They are hurting the US economy with by far too restrictive rates. They should not look only on macro data, those micro data from many US companies on their earnings dates could give them a much more complete picture what is currently going on in the USA. The FED should not hassle to do all that work.
The fed is NOT cutting at the next meeting! Not with tarriffs creating inflation. No way are they taking a chance. Tarriffs equal inflation so no rate cuts anytime soon.
5 and 1 year inflation expectations are unhinged. We also have a resurgence in Sweden so the Riksbank may well be forced to increase rates again.
https://polymarket.com/event/us-recession-in-2025?tid=1741960631449 https://www.benzinga.com/economics/...traders-could-still-pocket-over-50-gains-if-u Wagers on a U.S. recession in 2025 have climbed sharply in recent weeks, as softer-than-expected economic data and cautious outlooks from economists fuel investor anxiety. The likelihood of the U.S. economy entering a recession this year has hit 37%, according to betting markets tracked by CFTC-regulated Kalshi. Latest economic forecasts paint a concerning picture. The Atlanta Federal Reserve's GDPNow model forecasts a 2.4% contraction in the first quarter. That’s a stark reversal from the 2.3% expansion in the fourth quarter of 2024. Interest rate expectations reflect these concerns, as Morrison highlighted. Traders now anticipate three 25-basis-point rate cuts from the Federal Reserve in 2025, a notable shift from just one expected cut two months ago. Trump-related tariffs are a major driver of rising recession risks. “Tariff fears are pushing companies to increase prices, raising the likelihood of higher inflation this summer and complicating the Fed's policy amid recession concerns,” said George Vessey, forex and macro strategist at Convera. Several institutions have adjusted their recession probabilities higher, with JPMorgan economists now estimating a 40% likelihood of a recession in 2025. The Atlanta Fed's GDPNow model projects a 2.4% contraction in the first quarter, a stark reversal from the 2.3% growth rate seen in the final quarter of 2024. Yet, a single quarter of negative GDP does not meet the technical definition of a recession. A recession occurs if there are two consecutive quarters of negative GDP growth. This still leaves room for the economy to avoid a prolonged slump. Political Stakes And Recession Risks The political landscape may also play a role in determining whether the U.S. slips into a recession. On Friday, U.S. Commerce Secretary Howard Lutnick dismissed the Atlanta Fed's contraction forecast as "ridiculous. “It remains to be seen if all of the revolutionary changes to the economy and trans-Atlantic alliances will lead to a recession or if it will lead to higher growth rates in the future,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said. "We expect [Trump] will avoid a recession that would cost the Republicans their majorities in both houses of Congress in the mid-term elections in late 2026," Ed Yardeni, president of Yardeni Research, said. Last Sunday, Trump seemed to acknowledge the possibility of a recession in 2025, citing a “period of transition.” A No-Recession Scenario Could Lift Markets The S&P 500—tracked by the SPDR S&P 500 ETF Trust —has entered correction territory. It slid more than 10% from its February peak. The market selloff has coincided with rising growth concerns and increasing recession probabilities. Yet, if the economy defies expectations and avoids a downturn, equities could be poised for a strong rebound. Jeff Buchbinder, chief equity strategist at LPL Financial, highlighted that if a recession is averted and the current decline remains within the bounds of a correction, rather than evolving into a full-blown bear market — characterized by a decline of 20% or more — “then the upside potential over the next nine to 12 months may be as much as double the downside risk.” https://kalshi.com/markets/kxrecssnber/recession