Fed Chair Powell seems to be retaining the optionality of cutting 50 bps in Sep meeting by communicating his over reliance on employment conditions rather than inflation. Where as the other FOMC members seem to be in the "gradual cut" theory, Powell seems to be ready for a 50 bps cut if the Aug NFP comes as disappointing as July. We believe that his retention of optionality of 50 bps cut is ill timed. We do not see a rapidly deteriorating employment situation in US yet. Powell stands to gain very less & loose much if financial conditions keep on easing, leading to higher equities, higher wealth effects, higher service inflation & a resilient wage growth. We continue to believe in 3 cuts each in the next 3 meetings in REMCY24. Beyond the reason for removing restrictive nature of high real rates, leading to a 100-125 bps in next 6 months, we do not have comfort in market pricing of 230 bps cut by end CY25.
