Strong Data Casts Doubt Over The December Fed Rate Cuts

Economic and inflation data has cast serious doubt in the minds of Federal Reserve policymakers over the pace and extent of fed rate cuts, Reuters reported.

What Are The Expectations

US Central bankers continue to expect inflation to come under control, reducing the benchmark rate from 4.5 per cent to 4.75 per cent range. A lower benchmark will help discourage spending and investment, which also helps curb inflation, and remain 'neutral', a phrase recently used by Fed Chair Jerome Powell.

The skepticism around rate cuts follows Donald Trump's victory as President-elect in last week's election. The Wall Street in New York is trying to reconcile the inflationary pressures arising in the year ahead as Trump finalises his new policies with a push for tax cuts, higher tariffs and a crackdown on immigration, reported Reuters.

Speaking to CNBC, Chicago Fed President Austan Goolsbee acknowledged that the Personal Consumption Expenditures price index, which is stripped of food and energy costs, remains "too high" at an estimated 2.8 per cent for October. He also said, if officials do not see a common"neutral" stopping point, "it does make sense to start slowing at some point how rapidly you are getting there just to figure out ... are we at neutral, are we getting close?", he was quoted by Reuters.

Data indicates strong retail sales and rising prices for imported goods, which traders have taken into consideration and reduced bets on a December rate cut to 60 per cent from earlier 70 per cent, as reported by Reuters.

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