Jim Bullard wants a 50bp rate cut at the September FOMC, but he’s not getting any help from ADP or from the Wall Street Journal, whose Nick Timiraos is out Thursday with another one of his farcical “according to interviews with officials and their public speeches” trial balloon articles.
ADP printed 195k, far better than consensus (148k), and above even the most optimistic estimate from nearly three-dozen economists. July’s number was revised lower by 14k.
“In August we saw a rebound in private-sector employment”, ADP said, adding that “this is the first time in the last 12 months that we have seen balanced job growth across small, medium and large-sized companies”.
Obviously, we’ll have to wait for Friday’s jobs report (and Jerome Powell’s remarks) to draw any conclusions about the likely outlook for the September Fed meeting, but according to the Journal’s Timiraos, the “aggressive” move sought by Bullard and Donald Trump likely isn’t in the cards.
“Federal Reserve officials are gearing up to reduce interest rates… most likely by a quarter-percentage point”, his Thursday post reads. “The idea of an aggressive half-point cut to battle the slowdown hasn’t gained much support inside the central bank”, he goes on to write.
As usual, Timiraos cites “interviews with officials and their public speeches”, but these types of articles are almost always thinly-veiled guidance from the Fed.
Assuming payrolls isn’t a disaster on Friday, it looks like the Fed will remain reluctant to implicitly underwrite the trade war with aggressive rate cuts, although putting a dovish wrapper around the expected 25bp move might work to placate markets.
In any event, those hoping for 50bp likely saw a bit of wind go out of the sails on Thursday.