Rates & Fed Call Update — Post Strong NFP (induced) Shock

Rates & Fed Call Update — Post Strong NFP (induced) Shock

Jumbo strong jobs report derails the future of jumbo rate cuts, for now…

Post NFP Thoughts and Analysis: September’s NFP was the best since March (good news) but majority remains in lower paying service jobs. The U/R has declined (another good piece of news). However the highest seasonal factor in 2024 and the lowest survey participation in years suggests revisions ahead?

Updated Fed and Rates View: Even though we have our doubts on the overall quality of the recent NFP reading, at face value it was a stronger report and does argue for the Fed to cut at a slower pace. We remove our 50bps ease call from November (replaced with 25bps) and pushed out cuts by one quarter.

Easing Cycle Dynamics: Historically, there are 2 stages in an easing cycle, a move before the first cut and the rest comes after. We explore prior easing cycles.

 

*Current Fed Funds Midpoint is 4.875%	Scenario 1 Bumpy Landing	Scenario 2 Soft Landing	Scenario 3 Behind Curve	Scenario 4 Blue Sweep	Scenario 5 Red Sweep
Thursday, November 7 (After US Election)	Cut	Cut	Skip (election vol)	Cut	Cut
Wednesday, December 18	Cut	Cut	Cut	Cut	Skip
Wednesday, January 29	Cut	Cut	Cut	Cut	Cut
Wednesday, March 19	Cut	Cut	Cut	Cut	Skip
Total Number of 25bp Cuts in 2024	4	4	3	4	3
Year-End 2024 Fed Funds Rate	4.375	4.375	4.625	4.375	4.625
Total Number of 25bp Cuts in 2025	6	4	10	6	4
Year-End 2025 Fed Funds Rate	2.875	3.375	2.125	2.875	3.625
MUFG Probabilities	60%	35%	5%

 

Please see the download button above for the full write-up with charts and scenarios…