Prob. of Fed Rate Cut in Oct. Lowers to 80% after Unemployment Rate Hits 50 Years Low!
The probability of a rate cut in October was lowered to 81% after the announcement of the U.S. monthly nonfarm payrolls hit 3.5%, lowest since 1969.
The announcement of the U.S. monthly nonfarm payrolls on October 4, 2019, had missed the expectation while average hourly earnings slipped amid fear of recession from investors.
Despite missing the expectation, the U.S. unemployment rate still fell to 3.5%, the lowest since 1969, diminishing investors hope for another rate cut from the Federal Reserve later this month after a plummet at Wall Street on weekly basis.
“The unemployment rate usually rises ahead of a recession, so a fresh decline pushes out the timeline for any potential recession into late 2020 at the earliest,” said Josh Wright, chief economist at iCIMS in New York.
On Monday, September 30, 2019, the markets were placing about 40% chance of a quarter-point rate reduction at the October meeting while increased to 90% on late Thursday night in the U.S. However, after the report of an unemployment rate in almost 50 years low, the probability of a rate cut in October was lowered to 81%.
Fed Chair Jerome Powell reiterated on Friday that the economy was “in a good place,” adding that “our job is to keep it there as long as possible.”
Amid market volatility from the trade war between the U.S. and EU and the crisis in the Asian financial hub, Hong Kong, it is possible that the Fed will lower the rate again this year, though it may not be in October.
The most anticipated event should be the upcoming trade talks between the U.S. and China that even a glimpse of uncertainty could lead to a plummet and if worse, a recession.
On September 25, 2019, the Monetary Policy Committee (MPC) of Thailand voted unanimously to maintain the policy rate at 1.50% while revised down 2019 GDP growth forecast to 2.8% from 3.3% after exports had plunged more than anticipated.