The central banks around the world have continued to lower their interest rates.
Canada just cut rates by 50 basis points (bps) to 3.75%
The EU lowered rates by 25bps to a rate of 3.25%.
The UK looks to lower their interest rates by another 25bps. Here is how their inflation looks over the last year.
Meanwhile, the Japanese Central Bank will likely not increase rates following their meeting. The Yen is telling that tale.
China has lowered their rates by another 25bps to 3.1% for the 1-year LPR (Loan Prime Rate).
So that brings us to the United States. First of all, the FED tries to say that it is not political, but we know that there is at least political pressure forced on them.
Second, after a large 50bps cut last time, the markets are expecting a more moderate 25bps cut on November 6th (a day after the elections).
Meanwhile, we have shown a couple times how longer-term interest rates have climbed back above 4%, currently at 4.22% for the 10-yr treasury.
The 2-4 month treasuries have signaled their belief that rates will be cut another 25 basis points, reflected in their pricing around 4.5%-4.6%.
Most of the economic numbers that have come out since the last interest rate cut have been pretty strong, leading to the thought that we might have a no-landing scenario. Now to be clear, a no-landing scenario is not a landing, and rates will likely not go down in that situation. I still think it’s a less likely scenario but not impossible. Here is a Financial Times article from a few days ago that gets into that subject.
My opinion is that we see lower rates, a “soft landing,” and then in 12-18 months we see inflation start to rear its ugly head again. That’s just my opinion and certainly subject to change as things develop.
Until then, have a wonderful week and don’t forget to vote. If you have any questions, please reach out and we will be happy to have a conversation.