Strong Case for Fed Rate Cut: Insights from RenMac

Friday, 13 September 2024, 05:46

The strong case for the Fed cutting rates by half a point next week is highlighted by recent insights from Renaissance Macro Research. Traders are leaning towards a quarter-point cut, but RenMac argues for a more significant reduction due to cooling labor markets and soft housing transactions. With risks tilted to the downside, a half-point cut may be warranted to maintain a restrictive policy stance.
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Strong Case for Fed Rate Cut: Insights from RenMac

Understanding the Fed's Potential Rate Cuts

The strong case for the Fed cutting rates by half a point next week is spotlighted by Renaissance Macro Research's latest analysis. With current market sentiments leaning towards a quarter-point reduction,

Economic Indicators Justifying the Cut

  • Cooling Labor Markets: The labor markets are showcasing signs of cooling, which raises concerns about future consumption rates.
  • Soft Housing Transactions: A decline in housing transactions emphasizes the need for proactive monetary policy.
  • Non-Residential Investment Outlook: Non-residential business investment shows signs of potential cooling, suggesting a careful approach to future growth.

Neil Dutta, head of economic research at RenMac, stated that “If there is a higher risk of rising unemployment than rising inflation and the policy rate is well above neutral, a large upfront move makes sense.” This reflects the understanding that acting decisively could help mitigate further economic challenges.

The Market's Reaction

As of the latest reports, traders estimate a 45% chance of a half-point cut and a higher 55% likelihood of a quarter-point cut based on CME FedWatch Tool updates.


This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.


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