The US Fed is a slave of data and more so in the post covid world. We have seen how DOTS change significantly over a period of 3 months between Dec’23-Mar’24 & then again from June’24 to Sep’24. The sudden consensus in FOMC compared to pre blackout period where almost every one was in support of a gradual rate cut cycle surprises us. Only Bowman dissented who seems to have followed the data, leaving others to follow Fed Chair's risk management logic of 50 bps cut. We continue to believe that the 50 bps cut by Fed might be reflationary upending the long end bond yields. We are tracking Sep NFP between 250k-300k with significant upwards revisions to Aug NFP. We do not see UR going above 4.4 projections of Sep FOMC hence not the need for 50 bps cut in either of the two meetings in REMCY24. We expect total 100 bps of cuts by Mar’25 against current market pricing of 139 bps.
