Jul 24, 2019

The extreme volatility in the Fed funds market

Data: Bloomberg, DB Global Research; Chart: Axios Visuals

Market participants overwhelmingly expect a 25 basis-point cut from the Fed at this month's policy meeting, but positioning has varied wildly over the last 2 months.

The big picture: Comments from Fed chair Jay Powell during a speech in Paris pushed the likelihood of a 50-point cut as high as 60% in mid-July, despite strong data prints on U.S. retail sales, unemployment and industrial production. Fed fund futures prices now show investors see just a 14% chance the central bank cuts rates by 50 basis points to a range of 1.75%–2.00%, according to data provided by Deutsche Bank Securities.

Go deeper: The case for a Fed rate cut

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Investors are betting on multiple Fed rate cuts by year-end

Data: CME Group; Chart: Andrew Witherspoon/Axios

Despite Fed chair Jay Powell's "hawkish" rate cut last month, expectations for more cuts from the Fed are growing, thanks in large part to President Trump and the trade war.

What's happening: Investors are now pricing in a 0% chance the Fed doesn't move at its next meeting in September and a nearly 50% likelihood of 3 rate cuts by year-end.

Go deeperArrowAug 7, 2019

Jay Powell's constraints

Illustration: Sarah Grillo/Axios

Jay Powell did his best impression this week of a Fed chair making his own data-driven decisions about where he should set short-term interest rates. The reality, however, is that the markets and the president are giving him very little choice.

Driving the news: Powell cut interest rates on Wednesday — the first time the Fed has done so in over a decade. In doing so, he effectively fulfilled a prophecy that the fixed-income markets (and even the stock market) had been making for all of 2019. They saw the rate cut coming long before the Fed was willing to admit it, and they were right all along.

Go deeperArrowAug 4, 2019

Trump ups the ante on his Fed feud

Illustration: Rebecca Zisser/Axios

Just as the Fed seems poised to announce the first interest rate cut since the financial crisis, President Trump took his feud with the central bank one step further, saying it "has made all the wrong moves."

Why it matters: In previous administrations, it would have been unthinkable for the president to publicly lobby for a rate cut, which Trump says will goose the economy. And even though Trump may have unintentionally gotten everything he's wanted from the Fed so far, he is pushing for even more. On Monday, he tweeted: "A small rate cut is not enough, but we will win anyway!"

Go deeperArrowJul 29, 2019