During the recent Jackson Hole meeting, Federal Reserve Chair Powell sent a clear message to the market indicating a potential rate cut in September, according to Rabobank’s macro analyst Philip Marey.
Preparing for More Rate Cuts
Powell’s signal for a rate cut in September suggests a shift in the Fed’s monetary policy. While the exact size and frequency of rate cuts after September remain uncertain, it is evident that the Fed is gearing up for a cutting cycle.
Rabobank’s forecast anticipates a series of rate cuts in the upcoming FOMC meetings, with a focus on the deteriorating labor market. The expectation is for four consecutive rate cuts of 25 basis points each in the scheduled meetings for September, November, December, and January.
Looking ahead, the future of rate cuts beyond January will be influenced by the economic policies of the next administration. A potential Trump victory could result in a rise in tariffs and inflation, potentially halting the Fed’s cutting cycle. On the other hand, a Harris victory may lead to a more accommodative monetary policy with room for additional rate cuts in 2025.
Analysis and Implications
Investors should closely monitor the Fed’s actions and statements in the coming months to gauge the direction of monetary policy. The anticipated rate cuts could have significant implications for various asset classes, including stocks, bonds, and currencies.
With the possibility of a cutting cycle on the horizon, investors may need to reassess their portfolio allocation and risk management strategies to navigate the changing market dynamics effectively.