The FED dangles the carrot from transitory inflation to seeing a slowdown LATER DOWN THE LINE. Perhaps September we get ONE RATE CUT! Now there is a 50/50 chance since election is right around the corner, but I suspect it is a close call.
If they cut it will be quickly reversed early 2025 and multiple ones to follow. If it doesn't cut but keeps the rhetoric dovish, we slip slide till November 5th.
China finally getting its act together and that alone will prop up inflation. Surging GDP, service sector jobs and now wages is NOT a long-term prescription for lower rates. It is a suicide choice for now.
Here is today's response to the FED announcement:
"The shifts in the projections of the Fed's SEP are more hawkish than we anticipated," Economists at Jefferies said in a Wednesday note following the decision.
But the market managed a big rally in SP500 and Nasdaq despite this remark. Pandemic event anyone? Nah, that can't possibly change our stock market model could it.
Now the bigger carrot and one that has the market salivating:
"For 2025, the central bank anticipated four rate cuts in total or a full percentage point reduction in the benchmark fed funds rate."
Keep the hope alive. Like the Transitory remark. But before the end of this year, we will know for sure if the majority of economists actually worry about rate HIKES in 2025. Now that will be a Big Shift.
