Ueda's Comet - Part 2

Macro D Guest Article

Let's take stock. Does Ueda's comet leave us greeting us with the scarf of great fear or the signal of great warning? Let's start from the end, that is, from the markets. It is clear that now most financial operators expect not only one rate cut (but two or three and even more)

Last Friday, half an hour after the non-farm payrolls were published, futures prices declared a 94% possibility of three rate cuts by the Fed by the end of the year. By mid-morning yesterday, those three cuts had become five.

Source: Dall-E

The next official Fed meeting is September 18, and some have suggested an emergency meeting cut to calm things down. I don’t believe that. The last emergency Fed cut was on March 15, 2020, in response to the Covid-19 crisis. At that time, the federal funds rate was lowered by 1%.

Let’s go deeper …