Fed Cut Probability Update - Jim Bianco (Bianco Research)
- May 1 FOMC meeting (green) less than 50% (meaning no move) - June 12 FOMC meeting (blue) less than 50% (meaning no move) - July 31 FOMC meeting (red) less than 50% (meaning no move) - September 18 FOMC meeting (orange) less than 60% (since it is 5 months away, effectively a coin-toss) After this, the next FOMC meeting is Thursday, November 7, two days after the election.
Bonds rally as the Fed’s preferred inflation metric cam out not as bad as feared.
PCE deflator rose to 2.7% in March from 2.5% in Feb vs 2.6% expected. Core PCE, the Fed's preferred measure of underlying price pressures, remained at 2.8%, compared with an anticipated fall to 2.7%. First full rate cut is now priced for November. Note that we now have CPI, PPI and PCE inflation RISING for 2 straight months. Source: HolgerZ, Bloomberg
what a journey...
Source chart: Bloomberg
Prediction markets now show a 36% chance of ZERO interest rate cuts in 2024, according to Kalshi.
To put this in perspective, 4 months ago there was a ~3% chance of no rate cuts in 2024. The base case has gone from 6 rate cuts to 1 rate cut this year. There is just a 31% chance of 2 or more interest rate cuts this year. In other words, there is a higher chance of NO cuts than 2 OR MORE cuts. Could it be the fastest shift in Fed expectations of all time? Source: The Kobeissi Letter
What a difference five months makes for the Fed rate cut outlook. 😉
Source: Bloomberg Intelligence, Markets & Mayhem
2022-2024 summarised in one cartoon
Thru Andreas Steno Larsen
The Federal Reserve's next move might be to raise interest rates warns Former Treasury Secretary Larry Summers.
Source: Barchart
Raoul Pal - Global Macro Investors (GMI) has shared this chart on X showing Global liquidity growing at a CAGR of 8%.
His view: "While everyone is worried about 3.5% inflation, the real issue is the ongoing 8% per annum debasement of currency, on top of inflation. Your hurdle rate to break even is around 12%, which is the 10-year average returns of the S&P 500...just to keep your purchasing power". Key takeaway: if you want to protect your purchasing power in a global monetary debasement, you have 3 choices: 1/ spend; 2/ invest into risk assets; 3/ invest into store of values
