Odds of a June interest rate cut fell from 58.2 percent to 37.6 percent.
Image is courtesy of CMEFedwatch with Mish annotations.
In light of a much stronger than expected jobs report this morning, the market took back a June rate cut by the Fed that had been penciled in, albeit at a diminishing rate over the past month.
June Rate Cut Odds
- Month Ago: 67.3 Percent
- Week Ago: 63.3 percent
- Day Ago: 58.2 Percent
- Today: 37.6 Percent
Jobs Rise by 177,000 in April
This morning, I noted Jobs Rise by 177,000 in April, 58,000 Negative Revisions in Preceding Months
The BLS beats the street again vs expectations of 130,000 jobs.
ISM Prices
Yesterday, I noted ISM Manufacturing Has Contracted 28 of Last 30 Months
Prices are rising but orders slowing. Production has collapsed.
49.2 percent of companies reported higher prices with comments blaming tariffs. Only 9.7 percent of respondents reported lower prices for a net of 39.5 percent reporting higher prices.
Click on above link for details.
First-Quarter 2025 GDP, the Good, the Bad, and the Ugly
Also consider First-Quarter 2025 GDP, the Good, the Bad, and the Ugly
Real Final Sales (RFS) is the bottom line estimate of the economy. The difference between the reported headline number and RFS is Change In Private Inventory (CIPI) that nets to zero over time.
The outright terrible number in the report is RFS at -2.5 percent. (Baseline -0.29 minus 2.25 CIPI = -2.54 vs reported -2.50).
Those looking for something good can point to nonresidential investment that contributed 1.29 PP to the quarter.
And although April may show some more tariff front-running, we won’t see another 5 percent subtraction for imports.
This contradictory data is precisely why the Fed is in wait-and-see mode, ignoring Trump’s pleas for a rate cut.
For discussion please see my April 21, 2025 post Trump Tries to Shift Tariff Blame to the Fed, Calls Powell a Major Loser
There is no logical reason for the Fed to cut, and that has been my position. Today, the market agrees.
Since we still have no idea what Trump will do with tariffs, the economic odds range from stagflation to a deflationary crash. So why do anything?
A deflationary recession will reduce tax revenue and increase the deficit.
Any Questions?
Who does trump work for?
TRUMP is an independent malignant narcissist. the greatest actor of our time. hat tip charlie chaplin and great dictator………
The federal government cannot subsist on even a 4.25% FED funds rate given the debt size. 4.25% = bankrupt
Yup. The average interest rate on US government debt in 2016 was 2.2% Now it’s 3.3% with much higher debt.
And that 3.3% is lagging. https://www.ustreasuryyieldcurve.com/#google_vignette
Not so fast. Treasuries which follow FED rate need attractive interest rates, or noone will be interested in them. Unless serious economic depression makes them safe haven. It’s a tightrope.
If rates get out of control the fed will resort to yield control by buying up all the debt. The beginning of the end unless the idiotic corrupt traitors from both parties get their acts together and reduce our deficits. This did happen once after WW2.
Corporations Exploiting Migrant Labor Left Unscathed by Trump CrackdownTheatrical arrests and draconian legal measures mask the reality that Trump’s immigration policy largely preserves the status quo.https://www.leefang.com/p/corporations-exploiting-migrant-labor
Are the hedge funds plunging out their windows onto the streets yet?
The Fed Reserve created the friction with Trump since it conditioned investors and politicians to count on the Fed Reserve to lower rates when finance markets begin gyrating. The Fed Reserve can’t apologize to the country without losing credibility and possibly its existence.
Trump will browbeat them into a quarter point. Art of the deal and he is the baddass in chief you know.
I mean Powell gave him the middle finger, and there is pretty much nothing Trump can do about it.
Wage increases are a tell for the strength of the labor market, not job openings or layoffs. Until yoy wage increases fall enough to be in the 2%-2.5% range, the labor market is strong.
The last of the baby boom hits early retirement next year. Supposedly more of the late boomers are waiting for full retirement age than had been the case earlier so they are retiring at a high rate, or at least filing for SS now.
Will be interesting to see if the “trumpster” continues to put heat on powell to cut rates?
He’s already done that. He’s very proud to illustrate his economic illiteracy to the world. Just look how he did that with all the casino businesses he torpedoed.
Erdogen is his idle, worked out great for Turkey.