Harris: Plans to launch economic policy platform next week
US Vice President Harris stated that an economic policy platform will be launched next week, and her views on the independence of the Federal Reserve are completely opposite to Trump's. As president, she will never intervene in the Fed's decisions.
Fed Governor Bowman: Be cautious about rate cuts
Federal Reserve Governor Bowman said there are upside risks to inflation and the continued strength of the labor market, indicating that she may not be prepared to support a rate cut at the next meeting of U.S. central bank officials in September. She said that the progress made in reducing inflation in May and June was welcome, but inflation is still above the committee's 2% target, which is disturbing. I will remain cautious when considering adjusting the current policy stance. She also said that U.S. fiscal policy, the pressure on the real estate market from immigration, and geopolitical risks may all put upward pressure on housing prices, and the recent jump in the unemployment rate to 4.3% may exaggerate the extent of the cooling of the labor market.
Bank of America: Expect the Fed to cut interest rates by 25 basis points at its September meeting
Bank of America believes that the weaker-than-expected July nonfarm payrolls report, following other weak data such as the ISM manufacturing report, helped lock in the Fed's September rate cut. As a result, we have adjusted our outlook for monetary policy, leaning toward further rate cuts. We now expect the Fed to cut interest rates by 25 basis points at its September meeting. Despite this, we still expect the Fed to gradually ease monetary policy. While making this adjustment in expectations, we have also lowered our expectations for the final interest rate of the upcoming normalization cycle, lowering our expectations by 25 basis points to 3.25-3.5%. If the economy cools faster than we or the Fed expect, then this means a reduced need for a long-term high-interest rate policy stance.
Oxford Economics CEO: Fed may start cutting rates in September
Adrian Cooper, CEO and chief economist of Oxford Economics, said: Our expectation is that the Federal Reserve will begin to cut interest rates in the second half of this year, perhaps in September. However, this largely depends on changes in potential inflation, especially relative to wage growth. In recent years, labor inflation expectations have risen rapidly, which has surprised the Federal Reserve and many central banks. This means that workers are not only seeking higher wages to compensate for past higher-than-expected inflation, but also seeking higher wages because they believe that inflation may remain high. I think the Federal Reserve wants to see decisive evidence that the process of slowing down inflation will continue, not only overall inflation, but also core inflation will return to the level of 2%, and then prepare for a significant interest rate cut.
Federal Reserve issues cease-and-desist order against Evolve Bank
Evolve Bank and Trust has reached a cease and desist agreement with the Federal Reserve. The Federal Reserve found that the bank had engaged in unsafe and unsound practices in some of its fintech partnerships and lacked sufficient anti-money laundering controls. Due to the failure of intermediary Synapse Financial Technologies, many fintech users' accounts were frozen, drawing attention to Evolve. The situation is complicated by discrepancies in the accounts of Synapse and Evolve, as well as some fintech companies' account balances. Evolve plays an important role in the cryptocurrency ecosystem, providing financial services to BlockFi and FTX customers. The cease and desist order requires Evolve to submit a more detailed compliance plan and updated due diligence procedures to ensure that it has sufficient customer information.
Bond traders bring forward first Fed rate cut to November
Bond traders have brought forward expectations for the timing of the Federal Reserve's first interest rate cut by one month to November; the US will release employment data on Friday. This repricing came after the latest policy meeting of the Federal Reserve on Wednesday, during which short-term US Treasury bonds experienced their largest two-day rise since January. The yield on the most interest-sensitive two-year Treasury bond has fallen 17 basis points from its year-to-date high of 5.04% on Tuesday to 4.87%.
The probability of the Federal Reserve keeping interest rates unchanged in June is 72.3%.
CME's "Fed Watch": The probability of the Fed maintaining interest rates in May is 98.3%, and the probability of a cumulative rate cut of 25 basis points is 1.7%. The probability of the Fed maintaining interest rates in June is 72.3%, the probability of a cumulative rate cut of 25 basis points is 27.3%, and the probability of a cumulative rate cut of 50 basis points is 0.5%.
Custodia Bank loses lawsuit against Fed over rejection of master account application
Custodia Bank lost its lawsuit against the Federal Reserve for refusing its application for a master account. The judge ruled that the Federal Reserve has the right to decide whether to grant a master account. Judge Scott Skavdahl of Wyoming stated that federal law does not require the central bank to allow every qualified deposit institution to enter its master account system, and the evidence provided does not indicate that the Federal Reserve Board influenced a regional branch's decision to reject their account application.
Morgan Stanley: The Fed is now expected to slow down the pace of balance sheet reduction starting in June
On January 21st, Morgan Stanley economists stated that the Federal Reserve will announce a plan to slow down its balance sheet reduction in May and begin the process in June. Seth Carpenter and others at the bank wrote that they expect the Federal Reserve to "elaborately" discuss the balance sheet issue at the next three FOMC meetings, announce the scale and scope of the slowdown in May, and begin the process in June. Morgan Stanley previously predicted that the Federal Reserve would start slowing down its balance sheet reduction in September of last year. The bank still maintains its expectation that the balance sheet reduction will end in February 2025. It is expected that the overnight reverse repurchase tool usage of the Federal Reserve will drop to $250 billion by May or June.
