BREAKING: Interest rate futures are now pricing in just 2 interest rate cuts for the entire 2024.
This is the first time that markets are pricing-in LESS rate cuts than Fed guidance. Just 4 months ago, markets saw 6-8 rate cuts in 2024 with cuts beginning in March. Odds of a rate cut in June are down from ~60% before the CPI report to ~22% now. Source: The Kobeissi Letter, www.zerohedge.com
Nice chart by BofA showing central bank gold purchases from 2020-2023
Thru Ronnie Stoeferle
From expecting 6 Fed rate cuts to just two in 2024 😉
Source: Markets & Mayhem
Gold is rallying despite retail and institutional investors dumping.
This is bullish. But who is buying by the way? Central banks... Do they know something investors don't know? Source: BofA
A Pivotal Moment Between the ECB and the Fed?
This week unfolds as a critical juncture for the interest rate disparity between the US and Europe. As the spread between the 5-year US Treasury and EUR swap yields hits its highest level since the pandemic, the upcoming release of US CPI data and the ECB meeting carry the potential to reshape this landscape once again. All eyes are on ECB President Lagarde as she navigates the challenge of maintaining ECB independence from the Fed, especially amidst differing inflation dynamics across the Atlantic. The implications for currency exchange rates, interest rates, and monetary policy are captivating areas to watch closely in the coming days.
Some hawkish comments by fed officials seemed to be behind yesterday sell-off in stocks.
Among the comments: *BARR: BANKS' OFFICE COMMERCIAL REAL-ESTATE ISSUES TO TAKE TIME *KUGLER: `SOME LOWERING' OF RATES THIS YEAR LIKELY APPROPRIATE *FED'S HARKER SAYS INFLATION IS STILL TOO HIGH *BARKIN: FED HAS TIME TO GAIN MORE CLARITY BEFORE LOWERING RATES *GOOLSBEE: WORTH STAYING ATTUNED TO DETERIORATION IN JOBS MARKET *MESTER: NEED MORE PROGRESS ON HOUSING, CORE SERVICES INFLATION But the key market driver (to the downside) was Kashkari - President and CEO of the Federal Reserve Bank of Minneapolis - who hinted at the potential of NO RATE-CUTS. *KASHKARI: QUESTION OF WHY CUT RATES IF ECONOMY REMAINS STRONG “In March I had jotted down two rate cuts this year if inflation continues to fall back towards our 2% target,” Kashkari said in a virtual event with LinkedIn on Thursday. “If we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all.” His comments seemed to trigger a wave of selling in stocks.
The global economy is addict to easy-money policies.
While everyone is talking about boj hiking rates, we just experienced one of the largest weekly changes in the BoJ balance sheet assets in history. In USD terms, this move accounted for nearly $80 billion in one week... Source: Tavi Costa, Bloomberg
NOTHING NEW FROM POWELL YESTERDAY...
Fed Chairman Powell reiterated the Federal Reserve's cautious stance on interest-rate cuts, stating that they would wait and observe before making any decisions. While Powell didn't introduce any significant changes, his comment provided relief to Wall Street by suggesting that recent inflation data hadn't substantially altered the overall economic outlook. He also reiterated the likelihood of rate reductions at some point during the year. “On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Mr. Powell stated. “We do not expect that it will be appropriate to lower our policy hashtag#rate until we have greater confidence that inflation is moving sustainably down toward 2 percent.” At the same time, he said that cuts to the benchmark federal funds rate are “likely to be appropriate at some point this year” as he does not believe “inflation is reversing higher.”
