With economic signals getting even more negative, questions are bound to arise over whether the central bank will act even more aggressively.
A 25 basis point move "is still our base case," said Bill Merz, head of fixed income research at U.S. Bank Wealth Management. "But the odds of a more aggressive cut are increasing the longer we are in this period of extreme volatility, uncertainty, negative sentiment and inverted curves."
Market pricing Wednesday pointed to just a 19% chance of a 50 basis point cut at the September Federal Open Market Committee meeting, according to the CME. Traders are anticipating another reduction in October followed by an additional move late this year or early in 2020. One of those factors, which Fed officials have cited at various times when discussing the flatness of the yield curve, is term premia.
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