An interesting snippet from Deutsche Bank, expecting 25bp rate cuts ahead, but read on for the "however".
DB say that while Friday’s ... payrolls report was disappointing:
- the data did not rise to the "significant deterioration" Waller noted was needed for larger (50bp) rate cuts.
- So our economists keep to their expectations for a 25bps cut next week
And then add:
- The risk for the Fed is if and when job losses actually arrive in the payrolls report, you tend to get little warning
- With hiring now relatively soft it wouldn’t take much for the Fed to be behind the curve and a string of 50bp cuts to follow.
- With markets now pricing in over 250bps of cuts by January 2026 there has to be a reasonably high market expectation in the fixed income space of this policy error occurring
Federal Reserve Chairman Jerome Powell
