Fed funds futures have tumbled on the stronger than expected jobs report
Fed funds futures have tumbled on the stronger than expected jobs report. However, the market has merely taken out the chances for an aggressive 50 bps reduction at the upcoming July 30, 31 FOMC, and remains fully priced for a 25 bp easing. The January 2020 implied rate is also showing a second 25 bp easing by year-end, with about a 33% chance for 50 bps in cuts. Analysts suspect the FOMC will remain sidelined as growth still looks pretty good and a trade truce is intact for now which should provide some stability to global conditions. But, there is still non-negligible risk for an easing given the Fed's increased worries over low inflation, and Chair Powell's comments about an ounce of prevention is worth a pound of cure. Analysts'll look for hints at his upcoming July 11 testimony to Congress.