Fed rate cuts are coming, but investors disagree on the path forward
3 months, 3 weeks ago

Fed rate cuts are coming, but investors disagree on the path forward

Live Mint  

Markets might be running ahead of themselves by pricing aggressive Federal Reserve interest-rate cuts this year. According to CME Group data, investors are mostly pricing a 25-basis point cut in each of the next two Fed meetings in September and November, followed by a larger trim in December, which some analysts and investment managers say would be too aggressive as they have concerns about a slowdown in economic growth. “Although the Fed likes to say it is ‘data- and not data-point-dependent,’ the August employment report released on 6 September will likely be significant in the ’25 versus 50’ discussion at the next meeting," said Richard Clarida, global economic advisor at Pimco, and former vice chair of the Fed between 2018 and 2022. Pimco expects the Fed to cut rates by at least 25bps next month and signal that at least two more cuts of the same size are expected at the remaining two meetings this year in November and December, Clarida said. The easing is expected to continue next year, with the Fed’s target for the fed funds rate ending 2025 at 3%-3.25% range, down from the current 5.25%-5.50%, according to CME.

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