Source: Investing Published Tuesday 17/09/2024, 19:0
Citi economists on Tuesday provided an analysis of the latest retail sales data, citing a slight 0.1% month-on-month increase in August, with a marked rise in non-store sales leading to a 0.3% increase in the regulator’s sales.
Despite this rise, economists believe that this will not significantly change market expectations for the Fed’s interest rate decision. They expect a 25 basis point cut at this week’s Fed meeting and expect a total 125 basis point cut in interest rates for the year due to expected weakness in the labor market.
According to Citi economists, August’s retail sales figures showed resilience, especially with car sales falling less than expected. The group’s regulatory sales, considered a more reliable measure of consumers’ underlying demand, have seen a major boost from non-store retailers, which includes online shopping platforms.
Retail sales data, which often affects market expectations of the Fed’s policy actions, could have influenced views on the likelihood of a sharper 50 basis point cut. However, economists noted that the marginal increase in sales was not enough to bring about a meaningful shift in market pricing.
As the Federal Reserve prepares for its meeting this week, Citi economists set their expectations for a moderate rate cut. They stress that regardless of the decision on an immediate rate cut, further weakness in the employment sector will likely prompt the Fed to implement additional rate cuts totaling 125 basis points this year. The economists’ forecast comes amid ongoing discussions about the health of the US economy and the Federal Reserve’s strategy to address potential declines. Retail sales data is a critical indicator of consumer spending, a key driver of economic growth.
In other recent news, expectations of a significant rate cut by the Federal Reserve have risen, with speculation tilted towards a 50 basis point cut. Analysts from Evercore ISI reiterated their belief that a 50 basis point cut is the most appropriate. Major financial institutions participated, including Goldman Sachs, Bank of America, Wells Fargo and Citi, its forecast on the next steps of the Federal Reserve. These recent developments have been influenced by various factors such as labor market conditions, inflation trends, and other economic indicators.
Citi analysts expect the Fed to signal a more dovish stance, with larger cuts likely to be implemented in the future, impacted by labor market conditions. Wells Fargo, on the other hand, expects a 25 basis point cut next week, based on analysis of employment and inflation data. Bank of America also expects a 25 basis point cut, signaling the end of the longest pause after the rate hike cycle in the Fed’s history.
Goldman Sachs maintains its forecast for a 25 basis point cut next week, with additional cuts of 25 basis points expected in November and December, leading to a total cut of 75 basis points by the end of the year. This is based on the current state of the US labor market and inflation trends.
Finally, Citi analysts expect a series of rate cuts totaling 125 basis points by the end of the year, starting with a 25 basis point cut next week, followed by more substantial cuts later in the year. This is based on labor market data suggesting an economy on the brink of recession and the potential for further weakness in labor markets.
