The CME FedWatch tool is reporting a 59% chance that the Federal Open Market Committee will reduce the federal funds target range to 4.75%-5.00% from the current 5.25%-5.50% range.
Business media has been reporting sentiment leaning toward a 25-basis point cut versus the sentiment reported in CME data. For traders, this should signal a bump up in asset values. Over what time period, I cannot say. In the longer run, as more traders borrow against increases in asset values, we may see prices on goods and services creep up again. This means that anti-inflation policy rhetoric may heat up as well.
Going into 2025, the next President will have to spin a new narrative on inflation. A split Congress should give the next President cover to pursue a course of non-action. Any additional government spending will only bid up prices, but blaming lack of executive action on inflation on the party across the aisle will be the prime tactic.
Alton Drew
16 September 2024
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