Does the growing US economy need a rate cut?
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Why are markets still pricing in a September Fed rate cut despite strong US GDP growth?
Well, we know the Fed is expected to cut in September, even though the latest GDP numbers show an economy growing, and maybe the PCE numbers today will show inflation is rising. So is it the right thing to do? We'll see consumer inflation expectations later today as well. And New Zealand's economy seems to be doing a little better than expected. That's pushed bond yields lower. We'll look at that. And a swag of numbers today, including uh various European CP. PI prints and a load of Japan numbers as well. It's Friday, it's the twenty ninth of August, twenty twenty five. It's the morning call from NAB. Good morning. Well, US stocks pushed higher today with the Dow closing up 0.2%. The S P reached a new high, getting over six thousand five hundred, closing up at 0.3%.
The Nasdaq is up half a percent. In Europe, the Eurostocks fifty closed only marginally up, but a quarter percent rise in the CAT Caronta, 0.4% drop, though, in the FTSE one hundred. We've got a weaker US dollar. It's down 0.4% on the DXY. With the euro, the Aussie, and the yen all up 0.4%. The pound is up just 0.1%, though. The Aussie now above 65.3 US cents. 10-year bond yields are down. US Treasury is down two basis points to 4.21%. That's down 20 basis points in the last month. But two-year yields up almost three basis points today, almost at 3.65%. Let's remember though, that's coming back from the lowest. Yield since May. UK, France, and Italy have seen their 10-year yields down four basis points today.
It's the same for Aussie 10-year yields yesterday, finishing up 4.28%. This morning, though, on futures back up to 4.31%. And oil is marginally up, just 0.3% for WTI and Brent. Brent now at 88.30 a barrel. Comics gold is up 0.8% today as well, getting uh up to 3,477 overnight. Big Bitcoin more than one percent, 112,400, not quite the 122,780 that we saw last month, but heading back in that direction. Nabs Ken Crompton joins me today.
How do the latest US bond‑yield moves reflect expectations for future Fed policy?
So markets still very much pricing in that September rate cut from the Fed. Uh but for those looking for a reason not to do that, US GDP growing on an annualized basis according to the secondary vision. at th which was revised upwards at three point three percent uh last quarter. So that's more than the initial number. So we've got a growing economy. Jobless cla claims seem to be slowing. So there really is no immediate reason for a cut, is there?
I think you could certainly argue that uh argue that Phil and yeah, good good morning and uh and and happy Friday. So I mean looking th the the key event overnight in terms of US data really was those GDP revisions and you know sort of looking into that. I mean You we can sort of see personal consumption ticking up a little bit, but that's still pretty low, and obviously that's one point that is sort of seen to be uh at a big risk of being hit in particular by uh by sort of sentiment around tariffs. And obviously th a lot of this um remember these US numbers are annualised quarterly growth numbers and of course we still do have those incredibly weak outcomes back from Q one when um yeah, when we had uh massive pull forward
in um you know in in inventory investment and uh and and a few other things around um uh around the up up then upcoming impl implantation tariffs. It's a bit hard to differentiate um things. And even if you do sort of start to draw and draw a s to draw a smooth line through the quarters, it's still not telling you a stellar picture about US growth and outlook. But still if you add that into the picture of some of the rest of the data that that came out overnight, you know, we've still got jobless claims sitting there, um you know two twenty nine thousand actually touched below consensus for the night. So yeah, ongoing claims is up a little bit, but still um yeah, the the labor market is hardly um yeah, sort of
in s on some of the high frequency indicators, there's still hardly crying out a and painting a an incredibly dire picture. So yeah, on in sort of any other circumstances, um yeah, maybe having a yeah twenty one, twenty two basis points of cuts priced for yeah, for the the Fed meeting in a few weeks might look a bit excessive, but I guess it is what it is.
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Chapters
7 chapters
1
Why are markets still pricing in a September Fed rate cut despite strong US GDP growth?
0:01–2:00
2
How do the latest US bond‑yield moves reflect expectations for future Fed policy?
2:00–5:12
3
What does the recent US job‑less‑claims data tell us about labour‑market strength?
5:12–8:44
4
How might the composition of the Fed Board (e.g., Stephen Moran vs. Lisa Cook) influence the September decision?
8:44–11:49
5
What impact could the upcoming PCE and consumer‑inflation expectations have on the rate‑cut debate?
11:49–15:18
6
How are global data releases (Japan CPI, European CPI, German unemployment) shaping Fed outlook?
15:18–17:55
7
Why are services‑inflation trends and wage growth crucial for assessing future cuts?
17:55–19:19