I think the Fed does 25bps as they’ve signaled it, and I can’t imagine a justification for 50bps, barring something dramatic before the meeting
“Davidson” submits:
There is tremendous speculation for the Fed to cut 50bps(0.5%) this month. The history of Fed Fund shifts track the T-Bill rate after a couple of weeks leaving Fed Funds at a premium. That premium has hovered around 20bps over last 10yrs+. If this pattern holds, then we need to see T-Bill rates drop to 4.75%-4.8% range for a couple weeks to permit the Fed to act. We are not close yet even though it appeared we might drop below the spot rate 4.96% of a couple of weeks ago. Since then, T-Bill rate has hovered near 5%+/- and is 4.92% today. Unless we see the T-Bill rate below 4.8%, 25bps cut appears out of range and 50bps too far for the Fed to lead that far ahead which it has not done since the early 1980s.
The pressure to lower Fed Funds has been present for ~24mos with the consensus having the European Central Bank already cutting with perhaps another cut just around the corner. That they still face high inflation seems out of character with the recent cut. This does show the pressure traders can put on Central Bankers to alter stated policies.
Friday The 13th: The Cutting Cycle
BY TYLER DURDEN
FRIDAY, SEP 13, 2024 – 11:00 AM https://www.zerohedge.com/markets/friday-13th-cutting-cycle
By Philip Marey, Senior US strategist at Rabobank
Friday The 13th: The Cutting Cycle
Market speculation about a 50 bps rate cut by the Fed next week returned overnight after the Financial Times and the Wall Street Journal called the Fed’s rate choice between 25 and 50 bps a close call and former FOMC member Bill Dudley said there was a strong case for 50.