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Minutes, unemployment and rate cuts.

The minutes of the last FOMC meeting were released yesterday, and although the committee used some wording to manage market expectations regarding #ratecuts, the also mentioned that: “…the labor market could transition quickly from a gradual easing to a more abrupt downshift in conditions.” Which probably means they’re monitoring unemployment very closely as the catalyst for a quick action on rates. On the chart below, you can see the time the Fed has taken in the past from the last hike to the first cut. On average, it has been 5-6 months. In our current case, the last time the Fed hiked rates was on July 26, 2023, and the next #fomc meeting will be on January 31st, 2024, almost 6 months after the last hike. Currently, the probability of a rate cut by then is almost zero, but the next committee will take place on March 20th, where the market now discounts a 25 bps cut with 64% probability. This Friday at 8:30 am EST, the unemployment rate for December will be published with an expectation of 3.8%.

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