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قرار الاحتياطي الفدرالي: ما التالي بالنسبة إلى الأسواق الخاصّة؟

قرار الاحتياطي الفدرالي: ما التالي بالنسبة إلى الأسواق الخاصّة؟

منذ إلقاء رئيس الاحتياطي الفدرالي جيروم باول خطابه المحوري في منتدى جاكسون هول[1] في أواخر أغسطس والأسواق شبه متأكّدة من أنّ أسعار الفائدة ستُخفّض في اجتماع اللّجنة الفدراليّة للسوق المفتوحة للمرّة الأولى منذ أكثر من أربع سنوات.[2]

Oct 23, 2024رؤى السوق- 4 min
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Behind Closed Doors

The so-called ‘jumbo’ cut was pitched at the time as a ‘recalibration’, rather than as a sign that rates would continue to descend at a similar speed.

Despite the Fed’s bold move, the minutes of the last meeting reveal that the decision was somewhat controversial.[1] It was the first instance of a committee member (Michelle Bowman) dissenting from the final decision in nearly two decades.[2]

Federal Dicision Chart (2)

Source: U.S. Federal Reserve

The ‘median’ of all the members’ views implied a further 50 basis points of cuts by the end of this year, and a further 100 basis points by end-2025.[3] The projections imply an expectation that GDP will continue to grow, albeit at a slow pace, that employment will dip then recover, and that inflation will continue to decline.

The Economy

The determining factor in the decision to ease monetary policy after so long a period of restrictive rates was the perceived deterioration in the U.S. labor market, as indicated chiefly by the slowly rising unemployment rate.

Since then, economic data has been surprisingly positive. A ‘blowout’ jobs report for September showed hiring is still robust, and the unemployment rate has meanwhile fallen to 4.1%.[4] In addition, retail sales, income, and savings growth all point in the direction of a resilient economy.[5]

Inflation Progress

The latest CPI inflation figures also raised eyebrows. Core CPI rose for the first time in a year and a half, while Headline CPI rose faster than expected.[6]

It’s clear therefore that inflation is not in freefall, with certain areas of the economy proving less responsive than others.

With a broader lens, however, the general path of inflation has been downwards for some time. This is true of the most important inflation indicator - Core PCE - which is expected to show a smaller increase than CPI.[7]

In lieu of the so-called ‘soft-landing’, the phrase ‘no-landing’ has recently come into usage to describe a seamless return to normalcy, which now, counter to expectations, appears to be materializing.[8]

Given that the Fed is in range of its 2% target for inflation, it has in one sense achieved its goal. It is now focused on how to maintain, rather than fix, the situation.[9]

The View From the Markets

After the last meeting, there was an expectation in some quarters that the November meeting would see a further 50 basis points cut.

The bullish economic announcements, in particular the jobs report, coupled with the surprise inflation data, triggered a temporary wobble in sentiment, with some market participants doubting if the Fed would cut rates at the next meeting at all.

This passed relatively quickly, however, and as of the time of writing, views have recalibrated. The consensus is now a 25 basis points reduction in rates on November 8th,[10] barring any further shocks, such as a surprise PCE reading, this is likely.

Conclusion

Fed Governor Raphael Bostic, when interviewed in early October[11], expressed the view that individual Fed meeting decisions are ultimately of little significance compared to the larger question - where should the ‘natural rate’ (the rate at which the economy is neither expanding nor contracting) be?

In other words, where are the interest rate decisions ultimately heading?

For Bostic, this natural rate is somewhere between 3% and 3.5%, as we can see from the latest ‘dot plot’, opinions among his colleagues differ.

The U.S. election is likely to have a strong impact on the answer to this question. Both Harris and Trump have committed to substantial tax cuts and spending programs. As this will require additional government borrowing, it may be necessary to maintain relatively high interest rates to attract investors to government bonds.

Following Bostic’s advice, we think it’s wise to focus on the wood and less on the individual trees.



[1] New York Times

[2] U.S. Federal Reserve

[3] U.S. Federal Reserve

[4] U.S. Bureau of Labor Statistics

[5] Reuters

[6] J.P. Morgan

[7] CNBC

[8] Wall Street Journal

[9] Reuters

[10] CME FedWatch

[11] Wall Street Journal

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