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according to a report by china securities journal on the 28th, the latest statements from federal reserve officials released a major signal. st. louis fed president mussallem said in an interview, "the u.s. economy may be weaker than i currently expect, and the labor market may be weaker than expected. if this is the case, then a faster pace of interest rate cuts may be appropriate."

the current u.s. inflation rate continues to cool and is close to the federal reserve's 2% target. affected by this, traders are betting that the federal reserve is likely to cut interest rates for a second time by 50 basis points in november. interest rate futures contracts currently reflect a 54% chance of a 50 basis point rate cut in november.

it is worth noting that next week, fed officials headed by fed chairman powell will give speeches one after another, and the u.s. non-farm payrolls report for september, released next friday night, beijing time, will also provide further clues to the direction of the fed's subsequent monetary policy.

fed rate cut expectations rise

according to a report from the china securities journal on the 28th, fed officials gave some clues as to when and how much the fed will cut interest rates next.

st. louis fed president mussallem was one of the officials who earlier this month predicted multiple rate cuts this year. on september 27, eastern time, he expressed his opinion that the u.s. business sector is currently in a "good condition" and business activities are generally "stable."he added that large-scale layoffs don't look like they're coming anytime soon. but he acknowledged that the risks faced by the fed may require it to cut interest rates faster. "the u.s. economy may be weaker than expected, and the labor market may be weaker than expected. if this is the case, then a faster pace of interest rate cuts may be appropriate."

mussallem said:"the most important thing now is to take off the 'foot pedal' of the brakes, which is to gradually make monetary policy less restrictive."

in fact, the recent inflation data released by the united states have also increased market expectations for a faster rate cut by the federal reserve.

on september 27, local time, the federal reserve’s favorite inflation indicator, the august personal consumption expenditures price index (pce), was released. data show that the u.s. pce price index rose 2.2% year-on-year in august, lower than the expected 2.3%, and significantly lower than the previous value of 2.5%; it rose 0.1% month-on-month, in line with expectations and 0.2% lower than the previous value. excluding food and energy prices, the u.s. core pce price index rose 0.1% month-on-month in august, the lowest increase since may and lower than the 0.2% expected.

industry insiders said that the u.s. underlying inflation and the u.s. core pce price index in august increased slightly from the previous month, highlighting that the u.s. economy is cooling. interest rate futures traders see a slightly higher likelihood of a 50 basis point rate cut by the fed in november than a 25 basis point cut.

it is worth noting that next week, fed officials headed by fed chairman powell will give speeches one after another, and the u.s. non-farm payrolls report for september, released next friday night, beijing time, will also provide further clues to the direction of the fed's subsequent monetary policy.

will the fed cut another 50 basis points?

the current u.s. inflation rate continues to cool and is close to the federal reserve's 2% target level. affected by this, traders are betting that the federal reserve is likely to cut interest rates for a second time by 50 basis points in november.

according to the latest bloomberg survey, economists currently expect that the u.s. inflation rate will reach the federal reserve's target in early 2025, while the unemployment rate may rise slightly, which is consistent with the latest forecast released by the federal reserve last week.

"if the fed wants to cut interest rates by another 50 basis points in november, inflation data will not be an obstacle to them." inflation insights expert omair sharif wrote after the report was released. "in fact, the faster inflation cools, the more incentive they have to cut rates more quickly."

currently, interest rate futures contracts reflect a 54% chance of a 50 basis point rate cut in november, while the likelihood of a 25 basis point rate cut remains as high as 46%.

regardless, traders are betting that the policy rate, currently in a range of 4.75% to 5.00%, will fall 75 basis points by the end of the year and fall to a range of 3.00% to 3.25% by mid-2025.

but john choong, head of equities and markets at investors edge, said that while markets were expecting the fed to cut interest rates by another 50 basis points at its november meeting, a deeper look at the latest pce (personal consumption expenditures) data revealed a more nuanced picture. the decline in headline pce masks underlying inflationary pressures that remain, as the sharp decline was caused by lower energy costs and commodity deflation.

therefore, john choong believes that,beyond the headline data, there is little reason for the fed to rush into another 50 basis point cut.

daily economic news comprehensive china securities journal, brokerage china

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