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.
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
Financial conditions in the US are tightening as rates rise, equities fall and we see liquidity diminishing.
This setup could be set to continue as long as we see: 1) Signs of inflation remaining sticky or re-accelerating 2) The Fed cautious about the timing of cutting 3) Large deficit spending amid rising rates causing interest rate spend to surge (could hit $1.6T by Dec y/y w/o a rate cut) Source: Markets & Mayhem
BREAKING >>> Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation
SUMMARY OF FED CHAIR POWELL'S COMMENTS (4/16/24): 1. Recent data "shows lack of further progress on inflation" 2. Inflation has "introduced new uncertainty" on whether the Fed can cut rates later this year 3. Fed can maintain higher rates for "as long as needed" 4. Recent data has not given greater confidence on inflation 5. Restrictive Fed policy needs more time to work 6. It will likely take longer to "regain confidence" on inflation https://lnkd.in/eMaJZNZZ Source: CNBC, The Kobeissi Letter, Trend Spider
Longer-term inflation expectations are rising again.
The market's implied rate of inflation over the next five years has risen to the highest level in more than a year, at 2.6%, according to breakeven rates. Source: Bloomberg, Lisa Abramowitz
Yes, this week was painful for stocks.
But putting things into perspective, equities have been more resilient to higher rates recently versus previous periods of rising rates. Source: Edward Jones
