Central Banks

BoA analysis suggests 50bp Fed rate cut in July. But no, Fed will delay until September.

You know what its like, your analysis is telling you one thing but you go all like ‘Nah, that won’t happen’ … 

Bank of America / Merrill Lynch research, cites the historical slope of the 1 month to 6 month Fed Funds futures

  • history of this spread back to 1989 suggests the market has never priced an amount of inversion equal to today’s levels without the Fed cutting
  • suggests Fed could be cutting in a month
  • Fed typically cuts 50bps in the first month of an easing cycle

And then the ‘but, no’:

  • Fed would only consider easing in current environment to combat a slowdown
  • Fed has generally pushed back against idea of a pre-emptive cut to support inflation
  • Fed most likely to cut in September 


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