Will Fed Be Data-Dependent in Rates Decision?

Factors Driving a Possible Fed Rate Cut in July

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Why Does the Fed Need to Cut Rates?

  • Fed rate increases since 2015 have been the lowest cumulatively in past 5 cycles
  • Ballooning debt levels, subdued inflation have put a lid on even higher rates
  • A debt-to-GDP ratio of 250% without low rates would be untenable for US
  • Debt levels have soared due to wage growth lagging productivity gains
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Data Watch

  • Fed members divided on rate cuts ahead of July 30-31 FOMC meeting
  • After a weak jobs report last month, will data on July 5 show a rebound?
  • Inflation, retail sales, Q2 GDP data this month could influence Fed’s rate decision
  • Disappointing data sets could seal the deal for a highly anticipated Fed rate cut
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