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July Cut Odds Lift With GS Seeing “Solid Rationale” For Move

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  • They’re still low at only 3bps but July cut odds have been bolstered by Goldman Sach’s Hatzius seeing a “solid rationale” for a July rate cut, even if he keeps his forecast for a first cut in September.
  • Latest labor and inflation data suggest monetary policy rules pointing to 4% rates.
  • Rationale for acting in July includes volatility in monthly inflation that “could make a September cut awkward to explain” if there’s a temporary reacceleration, and the “undeniable (if never acknowledged) incentive to avoid initiating cuts in the last two months of a presidential election campaign”.
  • September cut pricing has built further, currently at a cumulative 27bp ahead of Powell’s interview by David Rubenstein at 1230ET.

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  • They’re still low at only 3bps but July cut odds have been bolstered by Goldman Sach’s Hatzius seeing a “solid rationale” for a July rate cut, even if he keeps his forecast for a first cut in September.
  • Latest labor and inflation data suggest monetary policy rules pointing to 4% rates.
  • Rationale for acting in July includes volatility in monthly inflation that “could make a September cut awkward to explain” if there’s a temporary reacceleration, and the “undeniable (if never acknowledged) incentive to avoid initiating cuts in the last two months of a presidential election campaign”.
  • September cut pricing has built further, currently at a cumulative 27bp ahead of Powell’s interview by David Rubenstein at 1230ET.