Hell, why not 50bps?
That’s what Scott Bessent wants to know ahead of next month’s Fed gathering. “The real thing now to think about is should we get a 50bps rate cut in September,” Bessent told Fox Business, while lauding Tuesday’s US inflation update as “fantastic.”
To be fair to Scott, “fantastic,” like beauty, is in the eye of the beholder. And the CPI release was decent, particularly to the extent it allayed some fears about tariff pass-through. But “fantastic” isn’t the word I’d use. I used other words on Tuesday for the update. Like “benign,” with the caveat that services sector inflation perked up.
Bessent’s just toeing the party line. And that line says rate cuts aren’t just desirable, they’re mandatory. Donald Trump wants them “NOW,” as he put it Tuesday, while threatening to sue Jerome Powell. “Everyone was expecting there would be goods inflation, but there was actually this very odd service inflation,” Bessent went on, in the same remarks to Fox, adding that a half-point cut at the September SEP gathering could “make up for the delay” in cutting.
As the figure shows, market pricing currently reflects about 65bps of cuts over the balance of the year — so, two 25bps cuts fully priced plus better than even odds of a third. I’d suggest that’s still as good a guess as any right now but plainly, the risks are skewed to the dovish side.
Anyone who supports Bessent’s view can (and surely will) note that Powell had no trouble cutting 50bps last September when the Fed was behind the labor market curve, or thought they were. Of course, the jobs market subsequently snapped back, making the outsized reduction and the pair of quarter-point cuts that followed look misguided in hindsight.
It’s possible that Stephen Miran, who by September 16 will be sitting in Adriana Kugler’s vacant governor seat, will dissent in favor of a half-point move in the event the Fed decides on a “regular”-sized 25bps reduction. Although unlikely, it’d be ironic if Miki Bowman similarly dissented given that she broke with the Committee consensus to vote against the September 2024 50bps cut, citing inflation concerns.
Commenting Wednesday morning on Bessent’s inquiries as to the merits of a 50bps move in September, BMO’s Ian Lyngen dryly noted that “the question implies the answer, or at least the Treasury Secretary’s stance on the issue.”
As for the notion that the administration might suspend the monthly jobs report in line with the musings of Trump’s pick for the top spot at the BLS, Lyngen said “investors will be more seriously considering figures that are not published by the BLS,” including and especially the ADP employment stats which “just became a lot more relevant.”
The White House said “the plan” is for the BLS to keep publishing the monthly jobs numbers. For now.
The BLS monthly numbers are required by law…damn I forgot that laws are meaningless in a Trump administration.
We keep commenting here like logic and common sense are in play, when they aren’t. Besides the occasional misdirection it’s all Trump all the time. If you want to know what’s real/true you have to ask him, full stop. He now controls what Harari calls the three ways society decides what’s true; the media, science and the courts. And if you say otherwise you’ll be lampooned, sued or worse, rendered to a death camp in a foreign country. To steal from Colbert, Meanwhile: Ivanka is going to produce a UFC production on the White House lawn. I don’t know anymore where I am and that’s part of the plan I suppose. I thought worm holes were just scifi, bad on me.
If a rate cut happens, the story will no longer be ”how bad will the tariffs hurt us”. It will be something else
At least they are not talking about Epstein now. See how slick that was ?