Market Overview Analysis by James Picerno covering: United States 2-Year. Read James Picerno's latest article on Investing.com
Will the better-than-expected numbers delay the widely expected rate cut that markets are pricing in for the Federal Reserve’s Sep. 18 policy meeting?
That level is more than one percentage point below the current 5.25%-to-5.50% Fed funds target rate – the biggest spread in more than a year that’s a defacto rate-cut forecast via the crowd’s collective wisdom. Nothing’s certain, of course, and so it’s prudent to consider what might persuade the Fed to postpone a cut at next month’s meeting. Robust incoming economic data and/or hotter-than-expected inflation numbers are on the shortlist.
“The Fed, we think, is likely to signal at Jackson Hole that a cut is likely at the next meeting, assuming that inflation progress holds,” predicts Mark Cabana, who heads US rates strategy at Bank of America. Ultimately, the incoming economic data will be a crucial factor, he notes. “So we don’t think that the Fed will close the door on the possibility of doing larger cuts if it seems necessary — but it likely won’t do much to signal that that’s going to happen.
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