Citi Strategists Predict Another 50 Basis Point Rate Cut by Fed in November
Citi strategists have forecasted that the Federal Reserve will slash rates by an additional 50 basis points in November, with the decision hinging on upcoming data, particularly the next monthly jobs report. Despite low jobless claims at present, focus is shifting to the employment components of the PMI data, while the Core PCE inflation report due out on Friday will also influence Fed officials' assessment of the labor market.
Chair Jerome Powell has characterized the initial 50 basis point rate cut as a strong signal of the central bank's readiness to take decisive action if labor market conditions necessitate further support. Should the unemployment rate stabilize, the Fed may opt to slow the rate cuts to 25 basis points per meeting. However, Citi anticipates that forthcoming data will compel the Fed to maintain a brisker pace of rate reductions.
The strategists anticipate a modest 0.18% month-over-month increase in core PCE inflation on Friday, translating to an annualized core inflation rate of 1.95% over the last three months. This subdued inflation outlook is expected to keep Fed officials attentively focused on labor market conditions.
While Fed officials have been heartened by low layoff rates and consistent jobless claims, Citi highlights the diminishing hiring rate and private payroll growth averaging around 90,000 jobs monthly as signals that unemployment may climb further. With two more jobs reports preceding the November FOMC meeting, central bank officials will have additional opportunities to assess the weakening trend in the labor market.
Analysis:
In essence, this article discusses Citi's prediction of a 50 basis point rate cut by the Federal Reserve in November, based on the upcoming monthly jobs report and other economic indicators. The Fed's actions are closely tied to the state of the labor market, with inflation data playing a crucial role in their decision-making process. The article highlights the potential impact of these rate cuts on the economy and emphasizes the importance of monitoring labor market trends for future developments.