Analysis: This year may end up with only a 50 basis point rate cut

Analysts say the FOMC minutes from July were too dovish, making it clear that the Fed will cut rates in September, which is the most Powell could reveal in his Jackson Hole speech on Friday. This will make traders (overly) optimistic that there will be four rate cuts by the end of the year, when the Fed may only cut two or three times. We can see that the swap market is pricing in about 95 basis points of Fed rate cuts by December, suggesting that the Fed will cut rates at each of the remaining three meetings this year, and suggesting that one of them will be a big rate cut. And if you pay attention to the discussions of Fed officials, you will find that this is an extremely optimistic view. The Fed is more likely to skip the November meeting to get a consensus on rate cuts, so this year may end up with only a 50 basis point rate cut.