Citigroup senior economist Robert Sockin said that in the low unemployment situation, the extent of the Fed's interest rate cuts may exceed market expectations.
According to the Zhitong Finance APP, Citigroup senior economist Robert Sockin said that in the low employment situation, the extent of the Fed's interest rate cuts may exceed market expectations. Sockin said that Citigroup expects the Fed to cut interest rates by 125 basis points by the end of this year.
He said, "Our US team believes that the Fed will start with 50 basis points and then cut another 50 basis points. Therefore, they can actually get a 125 basis point cut this year." He suggested that the Fed will cut interest rates by another 25 basis points at the December meeting.
Sockin said that the bank's forecast is based on the changing labor market conditions and the rising unemployment rate. "The magnitude of the increase in the unemployment rate is still worrying. Therefore, from a risk management perspective, this may cause the Fed to be more aggressive in its initial actions, especially if they believe that the risk of a significant slowdown in the economy will be high."
The unexpected rise in the US unemployment rate in July, from 4.1% in June to 4.3%, the number of people applying for unemployment benefits has decreased in recent weeks, but not significantly. According to the US Department of Labor data, the number of initial unemployment claims last week dropped to 0.231 million, below the year high of 0.25 million at the end of July.
Sockin said that if the unemployment data continues to be weak, the Fed's interest rate cuts will be particularly aggressive. Speaking of the Fed, he said, "We will wait for the results of the next employment report. I think if the unemployment rate starts to rise from now on, it will be difficult for them not to take more aggressive actions."
According to the CME FedWatch tool, investors expect a 25 basis point rate cut in September, and the probability of a 50 basis point rate cut is low. At last week's Fed Jackson Hole meeting, Fed Chairman Jerome Powell said the Fed is prepared to cut rates in September.
He said, "Now is the time for policy adjustments," "The direction of progress is clear, and the timing and pace of rate cuts will depend on the upcoming data, changing prospects, and risk balance."
He said that while the Federal Reserve is seeking loose monetary policy, it will continue to focus on its dual mandate of 2% inflation target and job stimulus.
Editor/ping