INSTANT Powell suggests 50 bp more cuts in store for 2024
Adds quotes
Sept 30 (Reuters) -The U.S. economy seems poised for a continued slowdown in inflation that will allow the Federal Reserve to cut its benchmark interest rate and "over time" reach a level that is no longer holding back activity, Fed Chair Jerome Powell said on Monday in remarks that showed no obvious lean towards a faster or slower pace of rate reductions.
Powell said in remarks prepared for delivery at a National Association for Business Economics conference in Nashville, Tennessee that the Fed is not on any preset course. "The risks are two-sided, and we will continue to make our decisions meeting by meeting."
He said he sees two more interest rate cuts, totaling 50 basis points, this year as abaseline "if the economy performs as expected," though the Fed could cut faster if needed, or slower.
The Fed cut rates by half a percentage point at its Sept. 17-18 meeting, lowering the range of its policy rate from a 20-year high of 5.25%-5.50%, which it had maintained for 14 months, to the current 4.75%-5.00% range.
MARKET REACTION:
STOCKS: The S&P 500 .SPX extended a slight loss to -0.23%
BONDS: The yield on benchmark U.S. 10-year notes US10YT=RR rose to 3.80%.The 2-year note US2YT=RR yield rose to 3.651%.
FOREX: The dollar index =USD extended to a 0.39% gain
COMMENTS:
GREG FARANELLO, HEAD OF U.S. RATES STRATEGY, AMERIVET SECURITIES, NEW YORK
"Powell is trying to temper things a little bit. It's probably the right thing to do. If you listened to Fed speak since their meting, they have definitely leaned more toward a gradual course lower. The economy has weakened a little bit here and there, but there are still pockets that have done well."
"The Treasury market is backing off these levels a little bit. We're kind of looking for a new catalyst. We had priced in a lot of fate cuts here. And we're still looking at 75 basis points of cuts for 2024. We're backing off a little bit from that. So a little bit of consolidation here makes sense."
WASIF LATIF, PRESIDENT AND CHIEF INVESTMENT OFFICER, SARMAYA PARTNERS, PRINCETON, NEW JERSEY
“It looks like Powell’s “over time” comments put a wet blanket on the market’s enthusiasm for the expected rapid fire rate cuts. There’s a bit of repricing going on based on those comments. There’s that usual disconnect between the bond markets and the equity market, where you see an initial move and then a bounce back.”
ROBERT PHIPPS, DIRECTOR, PER STIRLING CAPITAL MANAGEMENT AUSTIN, TEXAS
"During the speech Powell said this is not a committee that feels like it's in a hurry to cut rates quickly. That sounded less dovish than the market had priced in. There were some expectations for a 50 basis point cut by the end of the year. That comment probably took it off the table."
STEVE ENGLANDER, HEAD, GLOBAL G10 FX RESEARCH AND NORTH AMERICA MACRO STRATEGY, STANDARD CHARTERED BANK, NEW YORK
“It's his reiteration of 50 bps (in cuts) if it evolves the way they expect. The comments on housing inflation and the sluggishness of the move. The comment that the GDP revisions removed downside risks to the economy. In the revisions they revised up the savings rate. Prior to the revisions they were below 3% at some measly two and change level, now they're almost 5%. So, he's saying consumers can keep spending.… Overall there's nothing suggesting a downturn is more likely. He took his hawkish pills.”
“Maybe the market is beginning to worry that they're serious about doing 25s, because there was a sense that that was just for show that they were going to frontload, and here he's talking about upside risks certainly in a way he didn't talk at the FOMC.”
QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA
"He basically has underscored that the Fed remains data dependent but nonetheless - the way I'm interpreting it - he's looking toward an economy that remains solid and a labor market that remains solid and inflation coming down. The suggestion is that the Fed - even though there will be a host of new data before the next meeting - appears to be on tap for another rate cut in the November meeting."
(Compiled by the Global Finance & Markets Breaking News team)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
