After the last labor market report, the Fed is once again focusing more on the second mandate of the two that it intends to fulfill. After all, it has recently emphasized that the balance between the two mandates, full employment and inflation, is now more balanced. After months of focusing on inflation, the data series par excellence, the FOMC members are now focusing more on the labor market, Commerzbank’s FX Analyst Antje Praefcke notes.
Rapid cuts at every meeting until the end of the year
“However, the fact that price data continues to be a strong market mover was impressively demonstrated yesterday afternoon when the US inflation data for July came in slightly below market expectations. The market felt vindicated and reacted immediately and unequivocally: the dollar fell and interest rate expectations were maintained at 100 basis points until the end of the year.”
“These figures lay the foundation for the start of the Fed's rate-cutting cycle in September. Analysis shows that the monthly rate of change in the consumer price index excluding food and energy was below 0.2% for the third time in a row. A monthly increase in the consumer price index of 0.2% is roughly consistent with the Fed's target of an annual inflation rate of 2% based on its preferred price index, the PCE deflator.”
“The Fed will not be in crisis mode and just because inflation is moving permanently and definitively towards the target, pull down the key interest rate by 50 basis points in September. I rather believe in rapid cuts, possibly at every meeting until the end of the year. For this to happen, the August labor market report would have to disappoint massively and literally show a slump in employment. Then, could beads of sweat develop on FOMC members' foreheads.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD advances toward 1.1100 after soft US data
EUR/USD gains traction and rises toward 1.1100 in the American session on Wednesday. The data from the US showed that JOLTS Job Openings declined to 7.6 million in July, weighing on the USD and helping the pair push higher.
GBP/USD rebounds above 1.3150 on renewed USD weakness
GBP/USD trades in positive territory above 1.3150 in the second half of the day on Wednesday. The US Dollar (USD) struggles to find demand after soft US data, while an improving risk mood further supports the pair.
Gold recovers from multi-week lows, tests $2,500
After touching its lowest level since mid-August near $2,470, Gold stages a rebound and trades near $2,500. The benchmark 10-year US Treasury bond yield stays in the red below 3.8% after US data, providing a lift to XAU/USD.
Crypto Today: Bitcoin, Ethereum crumble under selling pressure, XRP hovers around $0.55
Bitcoin slips under $57,000 following $287.8 million in outflows from BTC ETFs on September 3. Ethereum erases 1.20% of its value on the day, dips to $2,395 on Wednesday. XRP loses key support and corrects to $0.5326, new monthly low in September.
Canada Interest Rate Decision Preview: BoC expected to cut interest rates by 25 bps on September 4
There is widespread expectation that the BoC will lower its policy rate for the third consecutive meeting on September 4. Mirroring previous decisions by the central bank, this move would most likely be of 25 basis points, taking the benchmark interest rate to 4.25%.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.