Latest Inflation Numbers and Discussion

Rates are now down. Just goes to show that markets can be unpredictable from minute to minute!
 
Will need a few days to settle in. But the market largely got what it expected.

Some sold the news and some are buying it.

It will be months before the economy responds to this cut.
 
Don't they have a couple more chances to cut (or raise) before the end of the year?

Or maybe even before the election?

Is it an admission that they should have cut 25 bps earlier?
 
One thing to keep in mind, as inflation cools and the interest rate stays the same, that means the real rate of interest is rising. This 50 basis points cut in the nominal rate only offsets some of that decline.
 
SecondCor521 said:
I was wrong about my 25bps prediction. To be kind to myself, the betting markets this morning had it at 55/45 between 50 and 25, so basically a coin flip.

They did 50bps, and market is solidly up.

Of course the press conference can always have an impact. I think that starts in half an hour.
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I thought it might be 50bps because I think the Fed regretted not dropping rates last time after the poor inflation report which came out shortly after their meeting. So they did two meetings worth.
 
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Yes I think it is an admission they should have cut earlier. Good for them! It was smart to do this now rather than pretend.

There are two more meetings this year (none before the election) and the dot plot says to expect 25 bp at each, then another 100 bp next year and another 50 in 2026.

Of course the dots never turn out to be right but they do reflect current Fed thinking.
 
gianmatt said:
Rates are now down. Just goes to show that markets can be unpredictable from minute to minute!
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?? Rates were expected to go down with a rate cut.

I really wish they had held off this rate cut or made it smaller.
 
1-Yr and shorter rates are down. 2-Yr and longer are slightly up. Intermediate and long rates have come down a lot relatively quickly, and could (should?) bounce up a bit. Current rates are getting to where some investors will take on more risk for a slightly higher yield, especially given the cost of short-term borrowing is decreasing.
 
As to why markets ended up down, the macro view would be the Fed felt they had to do 50 instead of 25 because the economy is weakening. Hence stocks went down.
 
USGrant1962 said:
As to why markets ended up down, the macro view would be the Fed felt they had to do 50 instead of 25 because the economy is weakening. Hence stocks went down.
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Or sell on the news as they'd been on a run.
 
USGrant1962 said:
As to why markets ended up down, the macro view would be the Fed felt they had to do 50 instead of 25 because the economy is weakening. Hence stocks went down.
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It will continue to settle out over several days and futures are very strong this morning indicating a strong reversal.

The markets being down a tiny bit is negligible compared to the early August panic over recession. Mostly recovered from that already.
 
Equity markets up just about everywhere. I think the only conclusion we can draw is day to day changes in asset market prices cannot be explained by policy measures.
 
PCE for August was released today (here). For the month, PCE was 0.1% and core PCE was 0.1%, and year over year PCE was 2.2% while core PCE was 2.7%.

This is the Fed preferred measure of inflation, and this is a positive report.
 
Gumby said:
Strong jobs report this morning offers further evidence that the Fed has nailed the soft landing. I expect this will soften the calls for a larger interest rate cut at the next meeting. https://www.cnbc.com/2024/10/04/september-2024-us-jobs-report.html
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Yes fantastic report, with rare upward revisions of prior two months.

The next two before the next Fed meeting will be messy due to strikes and Helene. So this one may get more weight than those. But jobless claims and quits (which are at a very low level) will weigh also.
 
Wages increased 4.0% year over year; is this inflationary? Will rates need to be increased?
 
ShokWaveRider said:
Wouldn't this be more of a reason to cut rates by a larger amount? (50 or 75 basis points)
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I don't believe so. Strong job growth implies potential upward wage pressure, which in turn can be a cause of inflation. The Fed's twin mandate is a relatively low and steady inflation rate AND a relatively low and steady unemployment rate. An annual wage rate growth of 3-3.5% is seen by the Fed as consistent with 2% annual inflation. They are just about there on inflation. And with wage gains at 4%, we don't want to reignite inflation by dropping rates too low.

The almost zero percent interest rates of the last decade were not normal and not good for the country.

Here is more informative analysis on the topic. https://www.reuters.com/markets/us/...-fed-base-case-quarter-point-cuts-2024-10-04/
 
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The 10-year yield was around 3.7% a week or two ago.

It was just over 4.0% this morning.

Market expecting only a 25 basis points cut in November instead of 50 basis points because of the strong job numbers Friday?

Also, in the last week or two the dollar has gained vs. other currencies.

Now the European Central Bank is expected to announce a rate cut on Oct 17.
 
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