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This week is expected to mark the beginning of the Federal Reserve’s (Fed) long-anticipated pivot toward lower interest rates. Bond investors appeared ready for a 25-basis-point cut until rumors circulated Friday that a large investor bet heavily in the futures markets for a 50-basis-point cut.1 Market expectations have now flipped, with a 50-basis-point cut the more likely outcome.2 The Fed dot plot (Fed projections for short-term interest rate levels) may have an even bigger impact on the direction of markets this week given so much easing already priced into Treasury bond valuations.
Economic data this week is highlighted by retail sales on Tuesday, housing starts Wednesday and existing home sales Thursday.3 Any upside or downside surprises in the retail sales report may be enough to sway the Fed’s decision for the size of Wednesday’s rate cut.
Sources:
1Yahoo! Finance – Traders’ Big Bet on a Half-Point Fed Cut Is Back in Bond Markets; 9/13/24
2Bloomberg
3MarketWatch – U.S. Economic Calendar; as of 9/16/24
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