Fed can cut rates, but won't yet as risk of fresh inflation 'too great:' Jefferies
Investing.com -- U.S. interest rates remain at the highest level in decades and many are calling on the Federal Reserve to cut rates to ensure that the path to a soft landing remain intact, but while central bank could justify a cut, the risk of pre-emptive rate cuts fueling a re-acceleration is"too great.'
The resilience in the U.S. economy has caught by many surprise, Jefferies admits as it ditched its recession call after pushing it back several times. But while there are signs of slowing growth, Jefferies doesn't believe that the risks of an outright recession have risen materially, though persists with its call for one cut this year either in November or December.
But market consensus is currently looking for a cut as soon as September, with the odds at about 61%, according toBeyond 2024, however, there is hope for steeper cuts as the Fed's fight against inflation could get a helping hand from improved productivity, Jefferies says, at a time when labor turnover is easing, suggesting that workers aren't as willing to switch jobs for higher pay as they may have been in the past.
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