Fast and Furious Rate Cuts Aren't Needed, Bory Says

Monetary Policy & Inflation - The market expects the Fed to cut rates by 25 basis points next month, with an 88% probability [5][6] - The Fed's dual mandate of full employment and price stability is in focus, particularly the conflict between a weakening labor market and persistent inflation around 2.9% [4][11][12] - Inflation is stuck slightly above the target, and it's uncertain whether it will decrease soon [9] - The pace of rate cuts is crucial; a slow and steady approach is favored, aligning with a softening labor market while respecting the inflation backdrop [8][9][10] - The market is closely watching break-even inflation rates for signs of unease, but the bond market is largely holding together [16] Labor Market - The labor market is showing clear signs of deceleration, and the Fed is concerned about it losing momentum [3][8] - The labor report next week is crucial in determining the Fed's next steps after the initial 25 basis point cut [4][5][6] - It's important to determine if the labor market slowdown is due to structural issues (AI, immigration) or cyclical factors [5] Fed Independence - The market is not seriously pricing in a loss of Fed independence, despite recent political drama [22] - Institutional guardrails are believed to protect Fed independence, which is crucial for market confidence and controlling long-end rates [21][23][24] - Maintaining Fed credibility is essential, especially with pressure to ease rates amid persistent inflation [15]