The bar for the Fed “not” to cut in September is now high…
On the one-year anniversary of the last hike, the time has come for cuts. We couldn’t have asked for a more dovish press conference from Chair Powell. He basically delivered on most of our dovish expectations. Yes, he fell short of promising a rate cut, but so long as the data continues to move in the right direction, we continue to believe that the Fed will deliver at least a 25bp cut at the September meeting (a 50bp cut requires a tail risk event to surface).
We continue to be of the view that the consumer-led slowdown is in its early stages, but is accelerating. This will make US growth prospects and job hiring challenging in the second-half. A September cut is likely the start of many more. The 2s10s curve will continue to dis-invert over the coming months.
Please see the link above for PDF for the full write-up with charts…
