Deterioration in the job market, an impending recession, falling inflation, and a stock-market selloff are the main reasons behind this decision.
The Federal Reserve is likely to cut interest rates sooner than the market predicted due to economic indicators.
But there are several reasons why there could be another abrupt alteration in the state-of-play, with the first cut coming as early as June, and potentially significant cuts priced in before the end of the year:A recession that now looks unavoidable and could begin as early as June;A rapid fall in velocity leading to a stock-market selloff
Moreover WARN notices are rising sharply. These must be filled in by employers 60 to 90 days ahead of plant closings and mass lay-offs, and lead unemployment claims. Would inflation stop the Fed cutting, even if the jobs market were markedly worsening and a recession looked imminent? Historically speaking, no. On average, the Fed starts cutting rates six months after CPI peaks. Inflation, in this cycle, peaked nine months ago, and has since fallen by a third.
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