Fed bets push 50bp cut expectation

The call for a large September Fed cut by a top official fuels market bets and data risks.

Fed bets shift as 50bp cut looms

US Treasury Secretary Scott Bessent pushed for a 50 basis point cut in September and argued the policy rate should be 150 to 175 basis points lower. The market reacted with little change at first, but the two year USD swap rate slid about 6 basis points to just under 3.40%, roughly 10 basis points below levels before the latest US CPI data. Traders are pricing in no more than 25bp of easing for now, and a 50bp move would need clearer signals from Jackson Hole or a very weak August jobs report to gain traction. Bessent also disputed EJ Antoni's proposal to slow the pace of monthly jobs data releases, keeping policy bets more data dependent.

On the data front, July PPI is expected to rise 0.2% on both the headline and core measures, a reading that would likely reinforce expectations that inflation remains tolerable for the Fed. Continuing claims rose to 1,974,000 last week. With the Trump Putin meeting looming, some market players see political noise limiting a run of fresh USD shorts, though the overall bias remains negative for the dollar.

The episode shows how political voices can amplify market bets even when data remains mixed. A 50bp call, if taken seriously, risks lopsided positioning that could force the Fed to prove more cautious than investors expect. Data will still drive the path, and a big wage or inflation surprise could reset the clock quickly.

Highlights

Data will decide the next move, not headlines.