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It is surprising how quickly things can change in a week.
It seems that the fed was unlikely to cut rates in September yesterday. Now, we are starting the price not only at 25 basis point cut, but also at the occasion of 50 BPS forest!
In the Fox Business Interview on Tuesday, Treasury Secretary Besant added fuel to speculation, saying, “The real thing to think about now is: Should we cut the 50 base point rate in September?”
I am enough to remember that when Besent said that he would not comment on the decisions of future monetary policy. But here we are.
So should Fed cut 50 BPS in September? Let’s look at both sides of logic.
No cut
Although the CPI print of this month was very luxurious and consensus, some underlying inflation pressure buildings are building.
Core goods, one of the biggest drivers of the disintegration story over the years, is now starting to accelerate at a higher level, operated by large -scale tariffs:
Despite the report of a very bad jobs last week, forward-loving estimates indicates a labor market that has started reusing again.
In the most recent trade headcount surveys, the quantity of businesses planned on a meaningful headconing in the following year got more bounced:
Given the speed index to spend the US’s US, the consumer looks very flexible in front of the tariff and their spending habits look as if they are starting to tick high:
Based on this confluence of data, I could argue that the economy was starting reusing. If the Fed is made to cut on the basis of data like NFP in September, it can be a mistake that sells the bond market as it happened last year when Fed did the same.
Cut and get up
Consumption is the engine that runs the American economy. Since Q4 2024, it is meaningfully slow.
If the purchasing power decreases due to the continuous implementation of tariffs, then we can see well consumer expenses and weak which can see the recession very quickly.
Meanwhile, the tariff collections keep growing more – and someone needs to foot to foot:
If companies pass the consumer on tariffs, those high prices will eventually hurt the total demand because additional price increase means that money cannot be spent anywhere else. Without offset, it is negative for development.
If companies absorb price growth, it will squeeze their corporate profit margin, which will also reduce economic production. Either way, it is negative to the approach to development.
Finally, with a labor market, which surprises the negative side with the bottom amendment that continues to tick less-cycly, some types of insurance rate cut may be understood here.
By keeping all this together, I can make the case for a break as I can make a case for adequate cuts.
It is no wonder that FOMC, on the question of where to go from here, is most divided into decades.
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