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Will the Fed cut interest rates within two weeks? Inflation data is troubling, who will break the "fog" of long-term interest rates?
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Hello everyone, today XM Forex will bring you "[XM official website]: The Federal Reserve will cut interest rates within two weeks? Inflation data is confusing, who will break the "fog" of long-term interest rates?". Hope this helps you! The original content is as follows:
A survey of economists shows that the Federal Reserve will lower its key interest rate by 25 basis points next week and in December. However, there are still significant differences among the economists surveyed regarding the level of interest rates at the end of next year. However, the three-week government shutdown has delayed the release of key official data on employment and inflation, clouding the economic outlook. However, recent private sector data show that layoffs and hiring are at moderate levels, indicating that there have been no major changes in the job market.
Shift in rate cut forecasts: The logic from “one” to “two”
A month ago, economists expected just one more rate cut this year. However, the new forecasts www.xmh100.come as Fed policymakers have recently shifted expectations for further rate cuts.
Federal Reserve Policy Priorities: Prioritize Response to Labor Market Weakness
Affected by the dual risks of tariffs pushing up already high inflation and further weakening of the labor market, the Federal Reserve seems to have prioritized the latter, which also prompted it to implement its first 25 basis point interest rate cut since December last month.
Details of interest rate cut forecasts in October and December: majority support but differences exist
Among the 117 economists surveyed, only 2 held different views. The remaining 115 all predicted that the Federal Reserve will cut interest rates by another 25 basis points on October 29, bringing the interest rate range to 3.75%-4.00%. Two others expected a 25 basis point interest rate cut in October and a 50 basis point interest rate cut in December. As for whether to cut interest rates again in December, the majority dropped to 71%. The survey was conducted from October 15th to 21st.
Market and FOMC attitude: traders are more convinced, officials focus on the job market
Financial market traders are more confident in this and have fully priced in expectations of two more interest rate cuts this year in interest rate futures contracts. Many members of the Federal Open Market www.xmh100.committee (FOMC), including Federal Reserve Chairman Jerome Powell, have said they will continue to focus on the job market.
Divisions within the FOMC: The difficult trade-off between employment and inflation
Ryan Wang, U.S. economist at HSBC Bank, pointed out: "To be fair, about half of the members of the Federal Open Market www.xmh100.committee (FOMC) are more concerned about the labor market, while the other half are focused on inflation risks." "The difficult question facing the Fed is whether this slowdown in employment mainly reflects a decline in labor demand, or whether Labor supply problem. It is difficult to accurately determine which factor has the greater impact, and this is of key significance to how monetary policy should respond. "
Employment and inflation data forecast: The unemployment rate has stabilized, and inflation is expected to pick up slightly in the short term.
The survey median forecast shows that the unemployment rate will remain at the current level of around 4.3% on average annually by 2027, which is basically consistent with last month's forecast. The latest survey shows that the Fed's inflation target, measured by personal consumption expenditures (PCE), is 2%, and inflation is expected to average above 2% annually through 2027. Delayed official data due to be released on October 24 is expected to show consumer inflation rose to 3.1% last month from 2.9% in August.
It is worth noting that during the U.S. government shutdown, the troubling inflation data has kept the 10-year U.S. Treasury yield still in a downward channel, as if the market's bets on the Federal Reserve's interest rate cuts have not ended at all, while the U.S. dollar index is strengthening.
External Pressure: Trump Continues Pressure for Big Interest Rate Cuts
For months, U.S. President Donald Trump has been pressuring Powell to cut interest rates significantly. "The risk is that there could be more interest rate cuts next year," said Brett Ryan, senior U.S. economist at Deutsche Bank. "The risk of the Fed losing its independence is higher than under any previous administration."
Summary:
The current Fed policy path The short-term market and most economists have reached a consensus of "two more 25 basis point cuts this year". An October interest rate cut is almost a foregone conclusion. Although the probability of an interest rate cut in December has dropped slightly, it is still a high-probability event. This expectation has also been reflected in the pricing of interest rate futures.
However, policy uncertainty still persists throughout the medium and long term: on the one hand, there are significant differences within the FOMC on the priorities of "weak job market" and "inflation risks", and the government shutdown has led to delays in key economic data. The Federal Reserve's "demand vs supply" behind the employment slowdown It becomes more difficult to judge the logic of "give";
For the financial market, in the short term, it is necessary to focus on the delayed release of inflation data on October 24 and the speeches of Federal Reserve officials to verify the logic of interest rate cuts; in the medium and long term, it is necessary to track the resilience of the job market, inflation trends and the leadership of the Federal ReserveChanges, these factors will jointly determine the subsequent turning point of interest rate policy, thereby affecting the pricing logic of the U.S. dollar, treasury bonds and foreign exchange markets.
The above content is all about "[XM official website]: The Federal Reserve will cut interest rates within two weeks? Inflation data is screwed, who will break the "fog" of long-term interest rates?", which is carefully www.xmh100.compiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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