Conflicting signals from the Federal Reserve on the timing and magnitude of U.S. interest rate cuts have accelerated hedging flows into swaptions and derivatives tied to overnight rates, with investors seeking protection against heightened policy uncertainty. Short-term volatility --specifically three-months and under -- on longer-dated swaptions such as those on 10-year and 30-year swaps has picked up following a prolonged period of compression. Swaptions, which are options on interest rate swaps, are one segment of the more than $600 trillion over-the-counter rate derivatives market....
Federal Reserve Chairman Jerome Powell said the outlook for the labor market and inflation faces risks, reiterating his view that policymakers will likely face a difficult road as they consider further interest rate cuts. "Near-term risks to inflation are tilted to the upside and risks to employment are tilted to the downside—a challenging situation," Powell said Tuesday in prepared remarks for an event at the Greater Providence Chamber of Commerce in Rhode Island. "These two-sided risks mean there's no risk-free path." Powell offered no indication whether he would support a rate cut at...
The Federal Reserve's interest rate decision last week was not as "dovish" as it first seemed, analysts at Barclays have argued. Along with a 25-basis point reduction to the Fed's target range for rates to 4% to 4.25%, the meeting included fresh projections which showed that officials are anticipating another half percentage point in rate cuts to help stem a downturn in the labor market. However, seven of the 19 estimates provided by policymakers in their closely-watched "dot plot" of forecasts saw fewer reductions this year, with one even calling for rates to have stayed at their prior...
Federal Reserve Governor Stephen Miran said interest rates are too high and proposed aggressive cuts in the coming months to protect the labor market. In his first policy speech since being sworn in as governor last week, Miran outlined the reasons why the neutral interest rate—where the policy rate neither stimulates nor burdens the economy—has fallen. That rate, which was likely overestimated in the past, has also been lowered recently by tariffs, immigration restrictions, and tax policy, Miran said. This means interest rates should be much lower to prevent economic damage, he...
The Federal Reserve's interest rate cut last week was not as dovish as some market participants seem to have expected, according to analysts at Yardeni Research. But in a note to clients, the analysts said that "relatively muted" gains in stocks after the Fed's decision was an indication that the move had already been priced in by markets. The Fed lowered its benchmark federal funds rate by 25 basis points to a target range of 4.00% to 4.25% last Wednesday, delivering its first rate reduction since December. Updated projections released after the meeting showed a majority of policymakers...
Reserve Bank of Australia (RBA) Governor Michele Bullock said that economic data since the August meeting has been slightly better than expected. Although inflation has fallen significantly and the labor market is approaching full capacity, Bullock emphasized that the bank will continue to monitor upcoming economic data. "We've made real progress in lowering inflation, but our job is to ensure it remains within the target range for a sustained period," she said.Bullock also noted that although labor market conditions have eased slightly, with a slight increase in the unemployment rate,...
President Donald Trump said he would fire Lisa Cook from the Federal Reserve's Board of Governors if she does not resign her post over mortgage-fraud accusations from a top...
The Reserve Bank of Australia (RBA) maintained its cash rate at 4.1% during its April meeting, holding borrowing costs unchanged after slashing 25 bps in the February meeting, aligning with market...