The Macro Trading Floor
What If The Fed Made a Mistake?
Oct 11, 2024
Recent U.S. macro data shows surprising core inflation and jobless claims influenced by a hurricane. With Trump leading polls, potential inflationary policies are on the horizon. Insightful discussions about the Fed's 50 bps cut bring up questions about mistakes made in response to evolving economic indicators. The turbulence in China's stock market and its implications for potential stimulus measures are also explored. Additionally, the role of seasonality in trading highlights both skepticism and opportunities within the market.
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Quick takeaways
- The recent spike in jobless claims due to natural disasters highlights the need for the Fed to cautiously analyze various economic indicators before making rate decisions.
- Trump's rising lead in the polls could result in inflationary policies, emphasizing the importance of understanding political dynamics for traders in investment strategies.
Deep dives
Inflation Trends and Fed Policy
Recent data on inflation showed a slight increase in the U.S. Consumer Price Index (CPI), with core CPI reaching 3.3 percent instead of the expected 3.2. However, the six-month annualized trend suggests a more stable inflation rate around 2.6 percent, indicating a slow decline. Notably, shelter inflation, which had previously alarmed the Federal Reserve, is beginning to show signs of improvement. This could imply that the Fed may feel comfortable cutting rates by 25 basis points per meeting, as long as the core Personal Consumption Expenditures (PCE) remains around 2.5 percent, signaling a manageable inflation environment.
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