“There is no question that growth is already slowing,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “The bond market is telling you that and the data is telling you that.’’
Goldman Sachs Group Inc.’s Jan Hatzius said in a note Wednesday that weak private employment suggests downside potential for Friday’s non-farm jobs figures. While rate cuts aren’t the bank’s base case, he wrote that the risks have risen and he’ll reassess after the payrolls data.
Some Insurance
Trump’s threat to slap 5% duties on all Mexican imports on June 10 unless Mexico reins in migration into the U.S. was another trigger for many Fed watchers. It led them to predict the central bank will lower rates as insurance against growth headwinds from the trade war.
The steepening move faded a bit on Wednesday after White House trade adviser Peter Navarro said in an interview with CNN that Mexican officials still have time to prevent the tariffs from taking effect.
Earlier this week, research firm Evercore ISI said its base case is that the Fed will “reluctantly cut rates three times starting in September in a mini-easing cycle” amid the trade conflict.
“As long as the Fed does not suddenly discover that it has slipped behind the curve, we would expect the FOMC to move in quarter-point increments, not 50bp or more to avoid signaling alarm,” Evercore’s Krishna Guha and Ernie Tedeschi wrote in a note Monday.
This article was provided by Bloomberg News.