MNI: ECB CUTS KEY DEPOSIT RATE BY 25 BP TO 3.0%

MNI BRIEF: China To Keep Stabilising Housing Market - CEWC

MNI BRIEF: China Focus On Boosting Consumption In 2025

MNI BRIEF: China To Cut Rates, Boost Borrowing-Work Conference

MNI China Daily Summary: Thursday, December 12

MNI BRIEF: Beijing To Protect Firms From U.S. Bill - MOFCOM

MNI: US JOBLESS CLAIMS +17K TO 242K IN DEC 07 WK

MNI: US NOV FINAL DEMAND PPI +0.4%, EX FOOD, ENERGY +0.2%

MNI: CANADIAN OCT BUILDING PERMITS -3.1% MOM

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

FED: 50's Out For Nov, But Still On Course For Back-To-Back 25s (1/2)

FED
USGlobalEM BulletFederal ReserveCentral Bank NewsFixed Income BulletsBulletMarketsEmerging Market NewsForeign Exchange BulletsRegionNorth America

Markets have been swift to price out a 50bp November rate cut after September's employment report came in much stronger than expected - in addition to revisions that recast the summer's weak hiring in a much more positive light. Indeed, November implied pricing has even dipped a little below 25bp, suggesting potential for a rate hold.

  • That's even before the Nov 1 release of October payrolls, which had previously been seen as the key to determining the size of November's Fed move of either 25bp or 50bp - either way, 50bp the following week looks out of the question now.
  • As for a hold, that will require more evidence, perhaps substantially so. If anything, the payrolls report was an outlier in the broader labor market context. We suspect dovish-leaning FOMC members (which include Chair Powell) will highlight thhe signal from broader measures, such as the Kansas City Fed's Labor Conditions Index (which includes data ranging from JOLTS to Challenger job cuts and showed negative momentum in August) as a pretext to keep "recalibrating" rates.
  • Powell this week said that "we do not believe that we need to see further cooling in labor market conditions to achieve 2% inflation."
  • But for its flaws, the monthly Employment Situation is the main labor market data point the FOMC looks at - and the only relevant labor component in the economic projections is the unemployment rate.
  • The September projections saw Q4 averaging 4.4% - we go into the quarter with September having printed 4.05%, which means that barring a massive jump, the forecast is already looking stale. The "low" projection on the FOMC for Q4 was 4.2%.
  • That alone warrants a reconsideration of the rate path for which the FOMC median was for another 50bp in cuts total in Nov and Dec. Powell noted this week that - while the Committee was in no hurry to cut rates quickly - the Dot Plot implied the default was indeed for two 25bp cuts at the next two meetings, "if the economy performs as expected".
334 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

Markets have been swift to price out a 50bp November rate cut after September's employment report came in much stronger than expected - in addition to revisions that recast the summer's weak hiring in a much more positive light. Indeed, November implied pricing has even dipped a little below 25bp, suggesting potential for a rate hold.

  • That's even before the Nov 1 release of October payrolls, which had previously been seen as the key to determining the size of November's Fed move of either 25bp or 50bp - either way, 50bp the following week looks out of the question now.
  • As for a hold, that will require more evidence, perhaps substantially so. If anything, the payrolls report was an outlier in the broader labor market context. We suspect dovish-leaning FOMC members (which include Chair Powell) will highlight thhe signal from broader measures, such as the Kansas City Fed's Labor Conditions Index (which includes data ranging from JOLTS to Challenger job cuts and showed negative momentum in August) as a pretext to keep "recalibrating" rates.
  • Powell this week said that "we do not believe that we need to see further cooling in labor market conditions to achieve 2% inflation."
  • But for its flaws, the monthly Employment Situation is the main labor market data point the FOMC looks at - and the only relevant labor component in the economic projections is the unemployment rate.
  • The September projections saw Q4 averaging 4.4% - we go into the quarter with September having printed 4.05%, which means that barring a massive jump, the forecast is already looking stale. The "low" projection on the FOMC for Q4 was 4.2%.
  • That alone warrants a reconsideration of the rate path for which the FOMC median was for another 50bp in cuts total in Nov and Dec. Powell noted this week that - while the Committee was in no hurry to cut rates quickly - the Dot Plot implied the default was indeed for two 25bp cuts at the next two meetings, "if the economy performs as expected".