Nick Timiraos, Fed analyst at the Wall Street Journal, has published his latest Fed outlook and there is no leak of a possible cut. Instead, he emphasizes that the Fed will set the stage for a September cut without committing to it. This is a consensus view given that September is fully priced in, including a small possibility of a 50bp cut.
“The Fed’s renewed willingness to cut rates reflects three factors: better news on inflation, signs of softening in labor markets, and a shift in the calculus of the competing risks of letting inflation stay too high and causing unnecessary economic weakness,” he wrote.
- Fed officials are not expected to change rates at their July meeting, but could hint at a possible rate cut in September.
- “Officials are increasingly wary of waiting too long and missing a soft landing.”
- Rising inflation and slowing labor market shift Fed’s risk calculus
- Core inflation down to 2.6% in June from 4.3% a year ago
- Unemployment rate up to 4.1% in June from 3.7% at end of last year
- New York Fed Chief Williams: ‘We have to make a decision at some point’ on rate cuts
- Fed Chairman Waller: Labor Market in ‘Sweet Spot’ and Must Be Maintained
- Chicago Fed Director Goolsbee Offers Argument for Rate Cut: ‘We’ve Tightened Rates a Lot Since We Held This Rate’
- San Francisco Fed Director Daly Warns: ‘We Haven’t Achieved Price Stability Yet’
I don’t expect any clear signs of action in the statement, but even gradual signals will be seen as validation, given that the Fed knows what the market is pricing in. On the other hand, the Fed could look to push the rate back from 100% for September to give itself some breathing room, especially in light of Friday’s strong GDP report.
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