Fed officials and data continue to point out that Wall Street will not get continuous cuts

For the majority of 2025, investors want several interest rate reductions from the Jerome Powell base and the Federal Open Market Committee (FOMC), knowing that it would take a cheaper loan and promote economic activity. The general consensus was that once the Fed was confident enough to start cutting, this would mean a change of time: a movement towards the eagerly awaited “normalization” of the rate of funds.

Thus, when the FOMC cut in September, this apparent fact was not only baked by markets, but the cuts were also to come for the rest of the year.

Unfortunately, the economy reproduces much better than many estimated – which means that the Fed may not be forced to continue the action as quickly as expected.

The markets continued to fight yesterday – on the third consecutive day – with Jim Reid from Deutsche Bank, noting: “The main catalyst was a solid lot of American data, which meant that investors remunerated their expectations for Fed Rapid rate reductions, and the advanced frontal treasure gives above.

This sums up counter-intuitive traders at the moment: when healthy economic data actually work against the feeling of analysts and investors. This week’s data should have reassured them: weekly unemployment requests fell to 218,000 for the closed week on September 20, GDP increased at an annual rate of 3.8% for T2 2025, according to a third estimate of the Bureau of Economic Analysis.

With the softening of the labor market (the economy added less than 30,000 jobs according to the most recent data), analysts hoped that this would push the Fed to continue to cut. But with inflation – the other annoying side of the Fed’s mandate, which was raised to almost 3% (ahead of its 2% objective) which gives the Fed just enough reasons to remain cautious.

Kevin Khang, Vanguard international economist, wrote in a note seen by Fortune this week: “It is not surprising that each hint of pivot nourished in offer with enthusiasm.

“First, the short end of the curve will continue to be shaped by the Fed’s double mandate to ensure both price stability and a sustainable maximum employment. Although inflation has lowered its peak significantly, it remains sticky. This is partly due to supply on the supply on the supply, including prices and a slowdown in immigration. ”

“At the same time, the labor market, although showing signs of softening, remains in balance according to historical standards. These dynamics suggest that the Fed route to sustained rate reductions is narrow. Inflation ready to stay above its target of 2% for a fifth consecutive year, the Fed is unlikely to relieve the policy rate substantially. ”

Longer view

Without being discouraged by data suggesting the opposite, investors continued to bank on a new reduction in October. According to the Fedwatch barometer of CME, investors still ball on 87.7% of a reduction of 25 additional basic bp at the October meeting.

Indeed, the members of the FOMC have pointed out that if other cuts could be to come, all that is beyond a meeting approach in Reunion would be a mistake. Like Mary Daly, president of the FED of San Francisco, said it in a speech on Wednesday: “To move forward, it is likely that other political adjustments will be necessary while we are working to restore price stability while providing necessary support for the labor market … But these are projections, not promises and making good decisions.”

This regular approach was taken over by President Jay Powell, who received the nickname “too late” by the oval office, gracked his prudent flexibility. But speaking in Rhode Island this week, Powell remained by his measured approach: “Our policy is not on a predefined course. We will continue to determine the appropriate position according to incoming data, the evolution of perspectives and the balance of risks.

“Our success in achieving these objectives is important to all Americans. We understand that our actions affect communities, families and businesses across the country. ”

Here is a snapshot of the markets before New York’s opening bell this morning:

• Future S&P 500 were flat this morning. The index decreased by 0.5% in its last session.
• Stoxx Europe 600 increased by 0.31% at the start of negotiations.
• The FTSE 100 of the United Kingdom Up 0.37% at the start of negotiations.
• Nikkei 225 from Japan dropped by 0.87%.
• CSI 300 from China increased by 0.6%.
• South Korea Kospi fell 2.45%.
• Nifty 50 of India fell 0.91% before the end of the session.
• Bitcoin refused to $ 109.7,000.

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