Sep Fed Cut Pricing Briefly Tops 45bp As “Sahm Rule” Triggered

The softer-than-expected U.S. jobs data sees markets price a deeper Fed policy mistake, with Fed funds futures briefly showing ~46bp of cuts for the next FOMC meeting (Sep) vs. ~33bp heading into the data. That measure now shows just under ~44bp of easing.

• A cumulative 83bp of cuts are then priced through the November FOMC, with 111bp of easing then showing through year end and 133bp of cuts priced through the January ’25 FOMC.
• The “Sahm rule” recession indicator has been triggered, but Fed Chair Powell played down the relevance of the indicator on Wednesday.
• Also note that the BLS stressed that "Hurricane Beryl had no discernible effect on the national employment and unemployment data for July, and the response rates for the two surveys were within normal ranges."
• The lack of impact from that event increases the validity of the data, helping explain the scope of the dovish repricing, along with the breadth of the disappointing readings within the data.