Is an emergency interest rate reduction meeting coming from the Fed?
The declines in world markets since Friday have accelerated on Monday. Cryptocurrencies also get their share of what happened, while the US media writes that the Fed can take an "emergency meeting" decision before September 18 and reduce interest rates.
While the fear that the US economy was dragged or entered into the recession was reflected in the markets as sharp declines, traders began to wait for the Fed to cut interest rates before the September decision through an 'urgent meeting'.
60 percent interim meeting expectation was created
According to the news of Yahoo Finance, while the fears of high inflation are replaced by recession concerns, it is thought that US growth will be stopped until the Fed starts its interest rate cuts. The news also reported that traders expected an emergency meeting and early discounts at about 60%.
50 basis points seem to be certain
Investors expect the Fed to go to an interest rate cut of at least 50 basis points in September, even if there is no 'interim meeting'. According to the Fed Watch Tool chart, which holds the pulse of futures markets, investors expect a discount of 50% basis points at 94.5% and 25 basis points from the September 18 meeting (for now).
Bond yields are falling rapidly
The decreases also increased bond purchases. The markets are experiencing the largest bond rally since last year's banking crisis. Known for its sensitivity to Fed policies, the return on 2-year U.S. Treasury bonds fell 0.5% and fell to 3.9%. Considering that the Fed's interest rates are between 5.25% and 5.5%, this rate remains quite low. Drops in German bonds also reached the peak of the last 7 months.
'The economy continues to slow down'
Tracy Chen, portfolio manager at Brandywine Global Investment Management, said:
“The market has begun to worry that the Fed is now late and that the economy has evolved from a soft descent to a hard descent. I think the economy will continue to slow down. Therefore, bond investment seems to make sense for now.”
#Powell