Morning Report: Awaiting inflation data this week

Posted on September 9, 2024 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning after getting roughed up last week. Bonds and MBS are down.

The week ahead will be dominated by inflation data with the consumer price index on Wednesday and the producer price index on Thursday. We are in the quiet period ahead of the FOMC meeting next week, so there won’t be any Fed speakers.

Fed Governor Christopher Waller said that the “time has come” to begin cutting rates. “If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings,” Waller said in remarks prepared for delivery at the University of Notre Dame. “If the data suggests the need for larger cuts, then I will support that as well. I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate.”

New York Fed President John Williams also supports cutting rates: “It is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” Williams said, in a speech prepared for delivery to the Council on Foreign Relations.

The base case for next week continues to be 25 basis points. Right now, the Fed Funds futures see a 75% chance of a 25 basis point cut and a 25% chance of a 50 basis point cut. The jobs report showed the labor market is softening, but not deteriorating which means the Fed doesn’t need to move with alacrity.

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