MNI U.S. Weekly Macro Wrap: Waller Ensures 50bp Cuts In Play

Executive Summary

• The FOMC surprisingly cut the Fed Funds target range by 50bps for its first cut of the cycle, a decision that was roughly 50/50 priced but with only MNI and just 9 of 113 analysts calling for the move.
• Surprises were relatively limited beyond the decision itself and if anything leaned marginally hawkish to us versus what might have been expected in the context of an outsized rate cut to start the easing cycle, from Powell’s caginess over the cadence of future cuts in the press conference, to some Dot Plot subtleties.
• In the week’s data, weekly jobless claims surprised lower as they continued to prove more resilient than expected, an important development considering heightened sensitivity to any labor softening.
• GDP tracking remains particularly healthy at just under 3% annualized for Q3, aided by robust retail sales.
• Mortgage activity has seen a renewed uplift with mortgage rates more than 100bps below April recent peaks, and its starting to boost new purchase applications rather than just refis, but it’s yet to feed through to sales data.
• However, a short notice scheduling of Governor Waller on CNBC has ended the week on a decidedly dovish note with concern around risks of inflation undershooting.
• It has tilted odds a little in favor of a second a 50bp cut in November and 2s10s at fresh two-year highs, with firm attention on next Friday’s PCE report (Waller sees four-month core inflation at 1.8% annualized). 

PLEASE FIND THE FULL REPORT HERE: US week in macro_240920.pdf