Expect Fed Baby Step Cuts Followed by Shock and Awe Panic

via mishtalk:

The Fed has convinced the market that baby step cuts are the order of the day even as the yield curve screams for more.

Heading into the July 31 FOMC meeting, there was a substantial 22% chance of a 50 basis point cut. Odds of a 50 basis point cut hit 50% at one point.

That speculation ended, for now, when Fed Chair Jerome Powell labeled the rate cut a “Mid-Cycle” Adjustment

In response, the yield curve inverted more, then more still on poor economic data.

Despite a Global Manufacturing Recession made worse by Trump’s China tariffs and despite a Bond Market Screaming for More Rate Cuts, traders believe the Fed will take baby steps.

Rate Hike Odds For December

Curiously, traders believe odds of a double cut and no cut are about equally likely.

One side is very wrong most likely, it’s those who believe no more cuts.

Eventually the Fed will panic, and I suspect by the end of the year.

Mike “Mish” Shedlock

 

 

322 views