Editor
Softer inflation data and strong retail sales have increased expectations of a 25 bp interest rate cut by the Federal Reserve in September.
Wall Street’s main indicators dipped slightly this Friday, and gold jumpers set a new high record. Despite softer-than-expected inflation data, the U.S. stock market’s main benchmark declined somewhat, which boosts concerns about global economic recovery. Regarding weekly gains, the market is heading for its fifth consecutive week of gains. After the past two weeks of market panic, traders have come to their senses this week. Last week’s market crash and BTC price-free fall have raised major concerns about the global economic recovery. This includes inflationary pressure and the likelihood of a faster and more aggressive monetary policy by the U.S. Federal Reserve.
Marketers were expecting that the Fed would move fast and boldly by raising its key interest rates by a half basis point in September. This week, this estimation has dipped due to the recent inflation data. Markt analysis sees now a high potential for interest rates to be cut by a quarter basis point, which will predict a market downturn or affect the stock market in the near or long term.
At its meeting in September 2024, the Federal Reserve will likely decide to lower interest rates; a 25 basis point reduction is now considered more plausible than a 50 basis point reduction. Based on recent economic data, traders have altered their expectations; the potential of a 25 basis point drop has increased to 68% from 47% last week. In the meantime, the chance of a 50 basis point cut has decreased from 53% to 32%.
BCA writes, “The Fed is now almost certain to start cutting interest rates in September, which will probably mark the end of risk-on trade in financial markets, i.e., the’sell the news’ moment.”
This change reflects the Fed’s renewed efforts to control inflation and stabilize the economy since traders now want a lower rate decrease to spur economic growth. More economic data supports the market estimate; this includes Softer U.S. inflation data raises the likelihood of a Federal Reserve interest rate cut in September. To some extent, labor market data and retail sales suggest a 25-basis-point cut. Since then, both industries have seen a glimpse of fast-recovery market hope. Meanwhile, investors will turn their attention to the week’s central bank gathering in Jackson Hole, where Fed chief Jerome Powell will speak.
Meanwhile, in the U.S. stock market, as of 11:35 a.m. ET New York time, the S&P 500 benchmark was down by 0.07% to 5,539.80 basis points. The S&P 500 is on track for a 3% weekly gain, and NASDAQ for a 5% gain, both potentially their best since November. The Tech Heavy composite Nasdaq dipped slightly by 0.08% to 17,582.45 basis points. The Dow Jones Industrial Average declined by 0.05% to 40,453.70 basis points. Dow Jones is set for a more than 2% weekly gain, possibly its best performance this year.
In other economic news, recent data has supported gold prices. As has been known, this particular interest rate supports gold, as lower rates reduce the opportunity cost of holding non-yielding assets.
