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Federal Reserve scenarios: more twists and turns to come
Weaker survey data, softer inflation, subtle shifts in the Federal Reserve's thinking and a poor July jobs report saw markets dramatically ramp up interest rate cut bets last week. These moves were then amplified in feverish markets as the unwinding of the yen carry trade saw a flight to safe havens. At one point the market was anticipating an inter-meeting interest rate cut by the Fed with nearly 140bp of cuts priced by the end of this year. Calm has since returned with just under 40bp now priced for the September FOMC meeting, with 100bp of cuts seen between now and the end of the year. In the wake of last week’s ... (full story)