MBS RECAP: Trump Wanted a Bigger Rate Cut, so He Pressed The Override Button

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Posted To: MBS Commentary

The world may never know if today's Trump tweets have anything at all to do with his stance on the Fed's fund rate, but one things for sure: they were single-handedly able to deliver another de facto rate cut. I'll explain… The Fed cut its rates by 25bps yesterday, as expected. Some pundits were calling for a 50bp cut. Trump wanted this and roasted the Fed for not delivering. Today, T rump tweeted about another 10% tariff on another $250 bln of Chinese goods. Markets reacted in a major way with one of the main effects being a sharp drop in Fed Funds Rate expectations. As such, until further notice and unless something pushes back in the other direction, financial markets are pricing in at least 12.5bps of additional rate cuts by the end of the year. Before the Trump tweet, there…(read more)

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