July Rate Cut Odds Still 100%
A reader asked if I still thought there would be a rate cut in July.
The short answer is yes.
CME Fedwatch shows the odds of a 50 basis cut declined from 29.2% to 4.9% but I never thought there would be a 50 basis point cut in the first place.
The long answer is the odds need to drop to the 50-60% area before there is a reasonable chance of no cut. If the odds drop under 50% then the Fed likely will not cut.
What happens depends on economic reports between now and July 31.
One good jobs report (see Job Growth +224,000 Tops Expectations, Wage Growth Disappoints), did not change my expectations at all given that I never forecast two cuts.
The yield on the 10-year Treasury note is barely back above 2%, 2.04% to be precise.
Futures suggest there is a 100% likelihood of a cut, but realistically, it's about 90% now, down from 95%.
Mike "Mish" Shedlock