“I think we could get to a 50 basis point (bp) cut with two 25 bp cuts, largely because there is room for the Fed to catch up with the economic situation that the US is in. And I think the market is pricing in another 1.5 percentage point cut next year. And at the moment, I don’t have enough arguments to really disagree with that,” says ING’s international economics director, James Knightley.
A basis point is one hundredth or one percentage point of 0.01%.
In a clear indication that he is ready for a rate cut, US Federal Reserve Chairman Jerome Powell recently said that “the time has come to tighten policy” as upside risks to inflation have receded.
Addressing the Jackson Hole Economic Symposium On August 23, Powell said: “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Knightley said the market will now be paying close attention to three crucial data points on US inflation and employment due by September 18.
If the labor market cools and inflation remains low, it could strengthen the market’s belief in a scenario in which the economy continues to grow without falling into a recession, leading to a lower interest rate environment.
This would be great for stocks and could help US markets continue to perform well.
Read also: US inflation rose 0.2% in July, paving the way for the US Federal Reserve to begin cutting rates
The US Federal Open Market Committee (FOMC), responsible for setting monetary policy including interest rates, will meet at least three more times this calendar year: on September 17-18, November 6-7, and December 17-18.
For more details, see the attached video.
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.