Odds of a June interest rate cut fell from 58.2 percent to 37.6 percent.
Image is courtesy of CMEFedwatch with Mish annotations.
In light of a much stronger than expected jobs report this morning, the market took back a June rate cut by the Fed that had been penciled in, albeit at a diminishing rate over the past month.
June Rate Cut Odds
- Month Ago: 67.3 Percent
- Week Ago: 63.3 percent
- Day Ago: 58.2 Percent
- Today: 37.6 Percent
Jobs Rise by 177,000 in April
This morning, I noted Jobs Rise by 177,000 in April, 58,000 Negative Revisions in Preceding Months
The BLS beats the street again vs expectations of 130,000 jobs.
ISM Prices
Yesterday, I noted ISM Manufacturing Has Contracted 28 of Last 30 Months
Prices are rising but orders slowing. Production has collapsed.
49.2 percent of companies reported higher prices with comments blaming tariffs. Only 9.7 percent of respondents reported lower prices for a net of 39.5 percent reporting higher prices.
Click on above link for details.
First-Quarter 2025 GDP, the Good, the Bad, and the Ugly
Also consider First-Quarter 2025 GDP, the Good, the Bad, and the Ugly
Real Final Sales (RFS) is the bottom line estimate of the economy. The difference between the reported headline number and RFS is Change In Private Inventory (CIPI) that nets to zero over time.
The outright terrible number in the report is RFS at -2.5 percent. (Baseline -0.29 minus 2.25 CIPI = -2.54 vs reported -2.50).
Those looking for something good can point to nonresidential investment that contributed 1.29 PP to the quarter.
And although April may show some more tariff front-running, we won’t see another 5 percent subtraction for imports.
This contradictory data is precisely why the Fed is in wait-and-see mode, ignoring Trump’s pleas for a rate cut.
For discussion please see my April 21, 2025 post Trump Tries to Shift Tariff Blame to the Fed, Calls Powell a Major Loser
There is no logical reason for the Fed to cut, and that has been my position. Today, the market agrees.
Since we still have no idea what Trump will do with tariffs, the economic odds range from stagflation to a deflationary crash. So why do anything?