Investors solidified bets on how deeply the Federal Reserve will cut interest rates this year after Fed Chair Jerome Powell said Friday the “time has come for policy to adjust.”
Powell noted the timing and pace of cuts will “depend on incoming data,” but markets quickly moved to fully price in four rate cuts of 0.25% by the end of 2024 on Friday morning after the Fed chair said the central bank has “ample room” to maneuver as policy enters its next phase.
“The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of unwelcome further weakening in labor market conditions,” Powell said.
Stocks rallied following Powell’s speech, with the S&P 500 (^GSPC) rising 1% and the tech-heavy Nasdaq Composite (^IXIC) gaining more than 1.3%. The Dow Jones Industrial Average (^DJI) rose about 1.1%, or more than 400 points, and the interest rate-sensitive Russell 2000 (^RUT) small-cap index soared, rising more than 2.5%.
Renaissance Macro head of Economics Neil Dutta highlighted in a note to clients that Powell didn’t use the word “gradual” when referring to rate cuts like some other Fed officials had in recent days.
This, Dutta argued, suggests “Powell is not removing the optionality of doing large moves as policy adjusts.”
Markets appear to agree.
Though with only three Fed meetings left in 2024, the looming question remains when the Fed would cut rates by 0.50% in a single meeting to reach the current investor expectation of four interest rate cuts this year.
Bets that a larger move will come in September moved up marginally on Friday morning. Markets are pricing in a 34.5% chance the Fed cuts by 50 basis points by the end of its September meeting, up from a roughly 24% chance seen the day prior, per the CME’s FedWatch Tool.
Economists have argued further weakness in the labor market would be the likely prompt for a larger cut in September. The July jobs report showed the second-weakest monthly job additions since 2020 and the highest unemployment rate, 4.3%, in nearly three years.
Powell addressed these developments on Friday, noting the cooling seen in the labor market is “unmistakeable” and that the downside risks to the central bank’s mandate for full employment have risen.
“It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon,” Powell said. “We do not seek or welcome further cooling in labor market conditions.”
Capital Economics’ deputy chief North America economist Stephen Brown wrote in a note to clients that a weak August jobs report, set for release on Sept. 6, would be a likely catalyst for the Fed to cut by more than 25 basis points at its next meeting.
“Fed Chair Jerome Powell’s dovish tone at Jackson Hole [on Friday] and pledge to do ‘everything we can to support a strong labour market’ implies that a 50 bp cut could be on the table at the September meeting, although such a move might require a further rise in the unemployment rate in the August Employment Report, which we judge to be unlikely,” Brown wrote.
Oxford Economics chief US economist Ryan Sweet agreed.
“The August employment report will determine whether the Fed cuts by 25 [basis points] or 50 [basis points] in September,” Sweet wrote.
The Fed’s next policy decision will be announced on Sept. 18.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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HOLYOKE — Amid a financial crisis in Holyoke, city Auditor Tanya Wdowiak gave her two weeks’ notice to the mayor and City Council president on Thursday.
Holyoke Mayor Joshua Garcia said Thursday that he received Wdowiak’s email resignation but hasn’t had a chance to talk with her.
Garcia said he came into the office to an email that requested he accept her formal resignation, effective Nov. 28.
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WASHINGTON — The government shutdown is creating a lot of uncertainty and disruption for Alaska Native communities, and for tribal organizations that administer federal programs.
These include SNAP, for food assistance, and the Low Income Home Energy Assistance Program, which subsidizes energy bills.
Ben Mallott, president of the Alaska Federation of Natives, said the prospect that both of those programs would run out of money, just as winter begins, puts some Alaskans in a life-threatening bind.
“Without LIHEAP, without SNAP, our communities, our tribal citizens will have to decide between fuel and food,” he testified to the Senate Indian Affairs Committee Wednesday.
During the pandemic, the Federal Subsistence Board allowed emergency hunting to improve food security. Now, with the government shutdown, Mallott said the Subsistence Board can’t even meet to consider it.
Since the second Trump administration began, advocates for Native American and Alaska Native people have stressed that programs that help them aren’t D.E.I. initiatives but the result of promises, treaties and laws. Now, between the administration’s cuts to government services and the shutdown, they say the government is dodging its responsibilities.
Hearing witnesses said tribal Head Start programs will run low on money if the shutdown extends into November, and that many agency experts tribes normally turn to have lost their jobs.
Pete Upton testified about the Trump administration’s plan to abolish a fund at the Treasury Department called the Community Development Financial Institutions Fund. Upton runs the Native CDFI Network, whose Alaska members include the Cook Inlet Lending Center. He said tribal communities are often in banking deserts.
“Native CDFIs are typically the only financial institutions serving these communities, providing access to capital, credit and financial education where no alternative exists,” he said.
Early in the shutdown, the Treasury Department fired the entire staff of the CDFI Fund. With no one at the federal office to certify the CDFIs, Upton said it’s hard for the community finance organizations to attract private-sector and philanthropic investment.
Certification is “a stamp for investors to say that ‘you are investable,’” Upton said. With it, “we bring in private capital at a rate of eight to one.”
Sen. Lisa Murkowski, chair of the Indian Affairs Committee, said tribes face enormous uncertainty as the stalemate in Congress nears the one-month mark.
“We can’t figure out the path forward right now on our spending bills, although I am a little bit more optimistic on that today,” she said.
She didn’t elaborate but said earlier this week that senators are engaged in productive talks.
Police cruisers parked in the Stamford Police Department parking lot photographed on August 7, 2024.
STAMFORD — A member of the Stamford Board of Representatives said he was “disgusted” by the city’s Board of Finance’s decision to delay a potential increase in budgeted officers for the city’s police department.
“I’m angry,” said Sean Boeger, D-15, during the Board of Representatives’ Fiscal Committee meeting Monday.
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Boeger is also a sergeant in the Stamford Police Department. The increase, which was on the committee’s agenda, would have created 13 more officer positions in the department. A grant would help pay for six of the 13 new positions.
It would’ve brought the total number of officers in the patrol division from 217 to 230, resulting in a 300-person force when all other ranks are considered. In the early 2000s, the department had 314 budgeted sworn officers, according to Chief of Police Timothy Shaw.
Lou DeRubeis, Stamford’s director of public safety, health and welfare, said the proposed increase was the first “in quite a number of years.”
The Board of Finance, however, during its Oct. 9 meeting, voted to hold the increase and asked the police department to provide more information, such as where the officers would be used and the total cost of hiring them outside of wages, such as health insurance and overtime.
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Boeger said during Monday’s fiscal committee meeting that he believed there were four officers assigned to traffic enforcement because “patrol demand is so high.” He said the department should be able to double the number of officers for traffic enforcement, which he said was “the top gripe of our citizenry.”
He also said the department was “lucky if we could cover the high schools when it’s busy.”
“If we want to be responsible and we want to have the nice things that a nice city like Stamford should have…we have to do something about this,” Boeger said.
Boeger said the department had opened up testing for new positions and that the department can’t send people to police academies, whether the city’s own or others, until the new positions are approved.
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“We’re gambling with open positions based on academy availability,” Boeger said.
Amiel Goldberg, D-13, said he wanted members of the committee to reach out to the Board of Finance to “let them know how deeply disappointed and frustrated our committee is.”
There had been an attempt to add the 13 police officer positions during the most recent budget process, but the Board of Finance cut the funding for those jobs.
At that time, members of the board said to come back with the request once the department filled out the rest of their 287 budgeted officer positions. The department will reach that goal by December, Bridget Fox, chief of staff of the mayor’s office, said during the Oct. 9 meeting.
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Shaw, in an interview before the fiscal committee meeting, said getting more people for the department would mean less people have to work overtime and because of that, less people would burn out and leave the force. Half the budgeted overtime, he said, is for the patrol division.
During the Oct. 9 meeting, the chief said the 13-person increase could result in a $500,000 reduction in overtime costs.
Laura Burwick, a member of the Board of Finance, said during the Oct. 9 meeting the request of $743,941 for the new positions was “a huge additional expense to the budget” and that she wanted to “see a little bit of the analysis that went into this.”
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Geoff Alswanger, a member of the finance board, said during that meeting that there have been “many sessions” where the board had “angst at the management” of the city’s pension funds and that the board “can’t ignore that as part of this equation.”
Boeger, however, during Monday’s meeting, said the department “has no power or control over that.”
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