• Economy
  • Editor’s Pick
Money Rise Today – Investing and Stock News
  • Investing
  • Stock
Stock

Markets are clamoring for the Fed to start cutting soon: ‘What is it they’re looking for?’

by August 2, 2024
written by August 2, 2024

If the Federal Reserve is starting to set the table for interest rate reductions, some parts of the market are getting impatient for dinner to be served.

“What is it they’re looking for?” Claudia Sahm, chief economist at New Century Advisors, said on CNBC just after the Fed concluded its meeting Wednesday. “The bar is getting set pretty high and that really doesn’t make a lot of sense. The Fed needs to start that process back gradually to normal, which means gradually reducing interest rates.”

Known for formulating the Sahm Rule that uses changes in the inflation rate to gauge when recessions occur, Sahm has been clamoring for the central bank to start easing monetary policy so it doesn’t drag the economy into recession. The rule states that when the three-month average of the unemployment rate is half a percentage point above its 12-month low, the economy is in recession.

The 4.1% jobless level is only a short distance from triggering the rule, and Sahm said the Fed’s insistence on holding short-term interest rates at their highest level in 23 years is endangering the economy.

“We don’t need a weak economy to get that last little bit out of inflation,” she said. “We do not have to be afraid of a good economy. If the inflation job is done, or we’re on that glide path, it’s OK, the Fed can start stepping aside.”

Asked about the Sahm Rule during his post-meeting news conference, Fed Chair Jerome Powell called it a “statistical regularity” that doesn’t necessarily hold true this time around as the jobs picture remains strong and the pace of wage gains decelerates.

“What it looks like is a normalizing labor market, job creation and a pretty decent level of wages going up at a strong level but coming down gradually,” he said. “If it turns out to … show something more than that, then we’re well positioned to respond.”

Markets, though, are pricing in an aggressive path for rate cuts starting in September with a quarter percentage point reduction, which would be the first since the early days of the Covid crisis.

After that, markets expect cuts in November and December, with an about 11% probability assigned to the equivalent of a full percentage point lopped off the fed funds rate by year-end, according to the CME Group’s FedWatch gauge of 30-day fed funds futures contracts.

Instead of starting to take its foot off the brake, the Fed on Wednesday said it is keeping its overnight borrowing rate in a range between 5.25%-5.50%. The post-meeting statement did note progress made on inflation, but also reiterated that policymakers on the rate-setting Federal Open Market Committee need “greater confidence” that inflation is heading back to 2% before they will be ready to lower rates.

DoubleLine CEO Jeffrey Gundlach also thinks the Fed is risking recession by holding a hard line on rates.

“That’s exactly what I think because I’ve been at this game for over 40 years, and it seems to happen every single time,” Gundlach said, speaking to CNBC’s Scott Wapner on “Closing Bell” on Wednesday. “All the other underlying aspects of employment data are not improving. They’re deteriorating. And so once it starts to get to that upper level, where they have to start cutting rates, it is going to be more than they think.”

In fact, he thinks the Fed could end up slashing rates by 1.5 percentage points over the next year, a pace that’s more aggressive than the policymakers charted when they last updated the “dot plot” of individual projections.

Gundlach figures that the consumer price index will be below 3% soon, making real rates, or the difference with the fed funds rate, particularly high.

“If you have a positive real interest rate that’s even one and a half percent, that would suggest you have 150 basis points of room to cut rates without even thinking that you’re being excessive about it,” he said. “I think they should have cut today, quite frankly.”

This post appeared first on NBC NEWS
0 comment
0
FacebookTwitterPinterestEmail

previous post
Today’s Stock Market Futures: Key Updates and Indicators
next post
New poll reveals how well voters know the candidates on Harris’ veep shortlist

related articles

LimeWire acquires Fyre Festival, asking ‘What Could Possibly...

September 17, 2025

Convenience stores are eating fast-food chains’ breakfast

September 15, 2025

Trump administration ramps up pressure on Labor Department...

September 11, 2025

Kenvue stock drops 10% on report RFK Jr....

September 8, 2025

Mortgage rates see biggest one-day drop in over...

September 5, 2025

Paramount mandates 5-day-a-week return to office ahead of...

September 5, 2025

Apple has survived Trump’s tariffs so far. It...

September 4, 2025

Trump family’s American Bitcoin makes stock market debut

September 4, 2025

Disney to pay $10 million to settle FTC...

September 4, 2025

Crash victims’ families prepare to make what could...

September 3, 2025
Enter Your Information Below To Receive Free Trading Ideas, Latest News, And Articles.


Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest News

  • President-elect Trump announces Pam Bondi as his new pick for US attorney general

    November 22, 2024
  • Alibaba shares surge 11% in Hong Kong as strong earnings fuel China’s e-commerce rebound

    February 21, 2025
  • NEWT GINGRICH: Biden may be president but Trump is already leader of the free world

    December 11, 2024
  • Biden is on the way out and Trump is taking the wheel. Welcome back, America

    January 17, 2025
  • Harris hauls in $81 million in first 24 hours since Biden bowed out

    July 22, 2024

Popular Posts

  • 1

    Secret Service admits leaning on ‘state and local partners’ after claim it ignored Trump team’s past requests

    July 21, 2024
  • 2

    Five more House Democrats call on Biden to drop out, third US senator

    July 19, 2024
  • 3

    Elon and Vivek should tackle US funding for this boondoogle organization and score a multimillion dollar win

    December 4, 2024
  • 4

    Forex Profit Calculator: Maximize Your Trading Potential

    July 10, 2024
  • 5

    Biden calls to ‘lower the temperature’ then bashes Trump in NAACP speech

    July 17, 2024

Categories

  • Economy (829)
  • Editor's Pick (6,064)
  • Investing (634)
  • Stock (926)

Latest Posts

  • Trump confirms National Security Council firings as Waltz’s Signal chat woes snowball

    April 3, 2025
  • The great airlift: how Apple ferried 1.5M iPhones from India to the US to beat Trump tariffs

    April 11, 2025
  • KJP denies that Kamala Harris has had trouble distinguishing herself from Biden: ‘I’ve not seen that’

    October 22, 2024

Recent Posts

  • Lithuanian defense minister: Only way to negotiate with Russia is with a ‘gun on the table’

    March 10, 2025
  • President Trump takes on ‘Big Pharma’ by signing executive order to lower drug prices

    May 12, 2025
  • State Department blocks pride, BLM flags from embassies, outposts with ‘one flag policy’

    January 22, 2025

Editor’s Pick

  • The great airlift: how Apple ferried 1.5M iPhones from India to the US to beat Trump tariffs

    April 10, 2025
  • DAVID MARCUS: The Vance vs. Walz debate is best scored using boxing rules

    October 1, 2024
  • Discovery of ‘fraudulent’ voter applications prompts PA probe of Arizona company’s potential involvement

    November 1, 2024
  • About us
  • Contacts
  • Privacy Policy
  • Terms & Conditions

Disclaimer: moneyrisetoday.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2025 moneyrisetoday.com | All Rights Reserved

Money Rise Today – Investing and Stock News
  • Economy
  • Editor’s Pick
Money Rise Today – Investing and Stock News
  • Investing
  • Stock