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By Norman VILLAMIN, Group Chief Strategist, Union Bancaire Privée (UBP)
With weak economic data since October, futures markets are, unsurprisingly, anticipating a high probability of a new round of rate cuts by the US Federal Reserve at its 16–17 September meeting.
What makes a potential rate cut at this meeting unique economically is that US inflation is above the Fed’s target of 2–2.5%, while US unemployment has not been rising over the past year going into the potential rate cut. Recall, almost a year ago, the Fed cut rates despite inflation being above target. While many were surprised by the Fed’s move a year ago – a half of one percentage point cut rather than its traditional quarter-point cut – the rise in the American unemployment...
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