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MNI US Macro Weekly: Door Shuts On Back-to-Back 50bp Cuts

A booming payrolls report sees markets slash odds of a second 50bp cut from the Fed ahead of upcoming inflation releases
AnalysisAnalysisHomepageCreditCommoditiesMarketsStory

Executive Summary

  • Payrolls growth of 254k beat consensus by 104k along with a 72k upward revision that erased July weakness, a soft print that had helped push the Fed towards its 50bp cut last month.
  • The unemployment rate also offered a large hawkish surprise, falling from 4.22% to 4.05% for a firm shift away from the median FOMC participant’s recently upward revised 4Q24 forecast of 4.4%.
  • The booming payrolls report has seen the market price out chances of a back-to-back 50bp cut from the Fed in November vs 34bp priced heading into the report. 
  • Combined with Fed Chair Powell on Monday saying “this is not a committee that feels like it's in a hurry to cut rates quickly” plus a beat for ISM services thanks to surging new orders, and there has been a particularly aggressively hawkish adjustment in STIR markets over the week.
  • Next week's CPI print suddenly becomes more interesting. It will take a very strong upside surprise (that translates into PCE terms) to force the FOMC to consider holding. If it's soft, though, the FOMC will probably see that as providing continued room to remove what they perceive as policy restrictiveness in the near-term before reassessing in early 2025. 

PLEASE FIND THE FULL REPORT HERE: US week in macro_241004.pdf

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Executive Summary

  • Payrolls growth of 254k beat consensus by 104k along with a 72k upward revision that erased July weakness, a soft print that had helped push the Fed towards its 50bp cut last month.
  • The unemployment rate also offered a large hawkish surprise, falling from 4.22% to 4.05% for a firm shift away from the median FOMC participant’s recently upward revised 4Q24 forecast of 4.4%.
  • The booming payrolls report has seen the market price out chances of a back-to-back 50bp cut from the Fed in November vs 34bp priced heading into the report. 
  • Combined with Fed Chair Powell on Monday saying “this is not a committee that feels like it's in a hurry to cut rates quickly” plus a beat for ISM services thanks to surging new orders, and there has been a particularly aggressively hawkish adjustment in STIR markets over the week.
  • Next week's CPI print suddenly becomes more interesting. It will take a very strong upside surprise (that translates into PCE terms) to force the FOMC to consider holding. If it's soft, though, the FOMC will probably see that as providing continued room to remove what they perceive as policy restrictiveness in the near-term before reassessing in early 2025. 

PLEASE FIND THE FULL REPORT HERE: US week in macro_241004.pdf

Keep reading...Show less