Is three rate cuts this year for the Fed plausible?

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For
markets,
that
door
has
certainly
opened
up
after
the
US
CPI
report
yesterday.
But
personally,
I
still
hold
some
reservations.
That
especially
since
we
have
seen
traders
run
back
the
post-CPI
moves
previously
in
the
last
two
months.

However,
for
now,
we
are
seeing
traders
start
to
open
up
to
the
idea
of
three
rate
cuts
by
the
Fed
for
this
year.

The
current
pricing
shows
that
September
is
pretty
much
a
done
deal
at
~98%
priced
in.
It
was
previously
~80%
before
the
inflation
numbers
yesterday.
Meanwhile,
traders
are
now
seeing
~60
bps
of
rate
cuts
for
the
year
as
opposed
to
~50
bps
before
the
report.

I
still
think
it’s
a
tall
order
for
the
Fed
to
go
with
delivering
three
rate
cuts
this
year.
The
message
that
such
a
move
will
imply
is
that
they
have
won
the
battle
against
inflation.
And
I
reckon
the
Fed
will
want
to
avoid
getting
too
carried
away
in
that
sense.

Then
again,
there’s
always
the
argument
that
they
could
say
even
with
cutting
rates
several
times
that
policy
is
still
“restrictive”.

In
judging
the
plausibility
of
three
rate
cuts,
I
reckon
a
lot
will
come
down
to
how
the
Fed
frames
its
plan
for
September.

If
they
sell
it
as
a
straightforward
narrative,
it
opens
up
the
door
for
back-to-back
moves
at
least.
And
that
means
three
rate
cuts
for
this
year
could
be
probable.
But
if
they
sell
it
as
a
potential
one
and
done,
then
markets
might
have
to
rethink
again
the
latest
moves
after
the
US
CPI
report
yesterday.