Perspectives
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Monthly Macro Monitor: September 2024
- September marked a pivotal month in monetary policy as the Federal Reserve lowered the target range for the federal funds rate by 50 basis points in its first rate cut since 2020, based upon data consistently indicating that the risks to the labor market and inflation have moved into better balance.
- Chair Powell also continued to emphasize that the FOMC is “not on any preset course” and that its monetary policy decisions will be made on a meeting-by-meeting basis after assessing incoming economic data.
- Nevertheless, the beginning of a highly anticipated easing cycle has been welcomed by market participants, who are now pricing in a high probability of three additional rate cuts by year-end, compared to the two rate cuts implied by the Fed’s median “dot plot” expectation.
- Against this backdrop, benchmark interest rates and interest rate volatility declined, the yield curve continued to steepen, and current coupon Agency MBS spreads to blended 5- and 10-year swap and Treasury rates tightened moderately over the course of the month.