Rabobank strategists reiterate its view that the Federal Reserve (Fed) is likely to cut rates again this year, even as United States (US) Treasury yields edge higher on persistent inflation concerns. They also discuss political developments around the next Fed Chair and the possibility of Jerome Powell remaining on the Federal Open Market Committee (FOMC), which could have a slightly dovish implication if he departs.

Rabobank still sees another cut

"It remains Rabo’s view that the Fed will likely cut rates again this year."

"Following Friday’s news that the Department of Justice would drop a criminal investigation into Fed Chair Powell, related to renovations at the Federal Reserve, Tillis has removed his objection to nominee Warsh facing a vote in the Senate."

"Aside from the policy guidance offered by the Fed, the market will be watching on Wednesday to see if outgoing Chair Powell is intending to retain his seat in the FOMC after his term as Chair concludes."

"If he leaves, Trump will have another seat to fill, which the market could anticipate as having a slightly dovish implication for the FOMC."

"While Trump may be a step closer to seeing his choice of candidate in the position of Fed Chair, US treasury yields have ticked higher this morning with the market still focused on inflation risks in the absence of little concrete news regarding a peace deal in the Middle East."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)