Rates & Fed Call Update — Post Strong NFP (induced) Shock
Jumbo strong jobs report derails the future of jumbo rate cuts, for now…
Post NFP Thoughts and Analysis: September’s NFP was the best since March (good news) but majority remains in lower paying service jobs. The U/R has declined (another good piece of news). However the highest seasonal factor in 2024 and the lowest survey participation in years suggests revisions ahead?
Updated Fed and Rates View: Even though we have our doubts on the overall quality of the recent NFP reading, at face value it was a stronger report and does argue for the Fed to cut at a slower pace. We remove our 50bps ease call from November (replaced with 25bps) and pushed out cuts by one quarter.
Easing Cycle Dynamics: Historically, there are 2 stages in an easing cycle, a move before the first cut and the rest comes after. We explore prior easing cycles.
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*Current Fed Funds Midpoint is 4.875% |
Scenario 1 Bumpy Landing |
Scenario 2 Soft Landing |
Scenario 3 Behind Curve |
Scenario 4 Blue Sweep |
Scenario 5 Red Sweep |
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Thursday, November 7 (After US Election) |
Cut |
Cut |
Skip (election vol) |
Cut |
Cut |
|
Wednesday, December 18 |
Cut |
Cut |
Cut |
Cut |
Skip |
|
Wednesday, January 29 |
Cut |
Cut |
Cut |
Cut |
Cut |
|
Wednesday, March 19 |
Cut |
Cut |
Cut |
Cut |
Skip |
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Total Number of 25bp Cuts in 2024 |
4 |
4 |
3 |
4 |
3 |
|
Year-End 2024 Fed Funds Rate |
4.375 |
4.375 |
4.625 |
4.375 |
4.625 |
|
Total Number of 25bp Cuts in 2025 |
6 |
4 |
10 |
6 |
4 |
|
Year-End 2025 Fed Funds Rate |
2.875 |
3.375 |
2.125 |
2.875 |
3.625 |
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MUFG Probabilities |
60% |
35% |
5% |
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Please see the download button above for the full write-up with charts and scenarios…