Fed can cut rates, but won't yet as chance of new inflation 'too great:' Jefferies





  • U.S. interest rates remain at the highest level in decades and many are calling on the Federal Save to cut rates to ensure that the way to a soft landing stay intact, but while central bank might justify a cut, the risk of pre-emptive rate cuts fueling a re-acceleration is "as well great.'

  • "The Fed can cut rates but doesn't have to... however," Jefferies said in a Friday note, indicating to fundamental quality in the economy recommending that no convenience from the Fed is required. "The chance of restoking the blasts of swelling are as well extraordinary to warrant pre-emptive rate cuts," it included. 

  • The strength in the U.S. economy has caught by numerous shock, Jefferies concedes as it discarded its subsidence call after pushing it back a few times. But whereas there are signs of abating development, Jefferies doesn't accept that the dangers of an by and large retreat have risen really, though continues with its call for one cut this year either in November or December.

  • During the June FOMC meeting, voting Fed members cut their outlook for rate cuts from three this year to just one amid expectations for inflation to remain higher than previously expected.   
  • But market consensus is currently looking for a cut as soon as September, with the odds at about 61%, according.
  • Beyond 2024, however, there is hope for steeper cuts as the Fed's fight against inflation could get a helping hand from improved productivity, Jefferies says, at a time when labor turnover is easing, suggesting that workers aren't as willing to switch jobs for higher pay as they may have been in the past.