After two disappointing ISM numbers, with the ISM Manufacturing falling well below 50, the implied probability of another Federal Reserve cut this month has spiked to 84% at the time of writing.
Based on what several FOMC members have said in recent days and weeks, and Chairman Jay Powell’s statement during the last FOMC meeting, it is now very likely that the Fed will cut rates again. Deteriorating economic circumstances at home provide ample room to ease monetary policy. In addition, the Fed is likely to come up with some form of balance sheet expansion (not necessarily QE) to increase liquidity and excess reserves at the banks. In other words: the Fed will come to the rescue in an attempt to keep this economic expansion going as long as possible.
