May 31, 2019

Rate cut bets spike after Trump's Mexico tariff tweet

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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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Netanyahu says July 1 deadline for West Bank annexation won't change

Photo: Artur Widak/NurPhoto via Getty Images

Israeli Prime Minister Benjamin Netanyahu said Monday at a Likud Party faction meeting at the Knesset, Israel's parliament, that his July 1 deadline for starting the process of annexation in the West Bank will not change, according to people in attendance.

Why it matters: The White House and the State Department have stressed over the last few weeks that the deadline set by Netanyahu is "not sacred" to the Trump administration — and that any discussion of annexation needs to be in the context of renewed Israeli-Palestinian peace talks.

Trump threatens to move Republican convention from North Carolina if capacity reduced

President Trump on stage during the 2016 Republican National Convention in Ohio. Photo: Bill Clark/CQ Roll Call via Getty Images

President Trump threatened in a series of Monday tweets to move this summer's Republican National Convention from Charlotte if North Carolina's Democratic governor, Roy Cooper, doesn't allow the event to be held at full capacity.

The state of play: Mandy Cohen, the state's health and human services secretary, said last week that the GOP should "plan for the worst" as mass gatherings will be a "very big challenge" if the number of coronavirus cases in the state continues to increase, per NPR.

The wreckage of summer

Illustration: Sarah Grillo/Axios

We usually think of Memorial Day as the start of the summer, with all of the fun and relaxation that goes with it — but this one is just going to remind us of all of the plans that have been ruined by the coronavirus.

Why it matters: If you thought it was stressful to be locked down during the spring, just wait until everyone realizes that all the traditional summer activities we've been looking forward to are largely off-limits this year.