May 31, 2019

Rate cut bets spike after Trump's Mexico tariff tweet

Data: CME FedWatch Tool; Chart: Naema Ahmed/Axios

Trump's Mexico tariff tweet further accelerated expectations of interest rate cuts from the Fed this year.

What's happening: Early Friday morning, Fed fund futures prices showed the chances of the Fed not cutting U.S. interest rates by its Dec. 11 meeting had fallen below 10%, with the probability of cutting rates at least 2 times rising to 61%, according to CME Group's FedWatch tool.

  • The likelihood of 2 rate cuts or more was just 25% on April 30.
  • Fed Chair Jay Powell and other policymakers have said the central bank does not plan to cut rates even once in 2019.

What they're saying: "The story here is that market participants anticipate the Fed will need to cut rates to maintain the [economic] expansion," University of Oregon economics professor Tim Duy wrote early Friday morning.

  • "The Fed has so far resisted this story, but the odds favor them moving in this direction. The simple fact is that the Fed reacts systematically to a changing forecast. Financial markets are signaling the the growth forecast will worsen enough, or that the risks to the growth forecast will become sufficiently one-sided, that the Fed will have to act."

Flashback: Two rate cuts, or a reduction of the Fed funds rate by 50 basis points, is exactly what Trump's economic adviser Larry Kudlow told me the White House wanted back in March.

Go deeper: Trump's Mexico tariffs mark a declaration of isolationism not seen since the 1940s

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Coronavirus spreads to more countries, and U.S. ups its case count

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

The novel coronavirus continues to spread to more nations, and the U.S. reports a doubling of its confirmed cases to 34 — while noting those are mostly due to repatriated citizens, emphasizing there's no "community spread" yet in the U.S. Meanwhile, Italy reported its first virus-related death on Friday.

The big picture: COVID-19 has now killed at least 2,359 people and infected more than 77,000 others, mostly in mainland China. New countries to announce infections recently include Israel, Lebanon and Iran.

Go deeperArrowUpdated 2 hours ago - Health

Wells Fargo agrees to pay $3 billion to settle consumer abuse charges

Clients use an ATM at a Wells Fargo Bank in Los Angeles, Calif. Photo: Ronen Tivony/SOPA Images/LightRocket via Getty Images

Wells Fargo agreed to a pay a combined $3 billion to the Justice Department and the Securities and Exchange Commission on Friday for opening millions of fake customer accounts between 2002 and 2016, the SEC said in a press release.

The big picture: The fine "is among the largest corporate penalties reached during the Trump administration," the Washington Post reports.