LIVE MARKETS-Déjà vu?

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

DÉJÀ VU?

On September 18, 2024, the Federal Reserve slashed interest rates by 50 basis points, its first since the pandemic and a larger-than-usual cut as it cited concerns over the health of the labor market.

That move was followed by two quarter-point reductions, but the Fed then paused its easing cycle as the U.S. economy showed resilience and inflation remained stubbornly high.

Fast forward 354 days, the central bank is poised to resume rate cuts, with markets widely expecting a 25 basis point reduction, once again driven by signs of a slowdown in jobs growth. But unlike last year, traders see only a slim 6% chance of a more aggressive 50 bps move.

So, what’s changed?

For starters, the U.S. economic backdrop has shifted meaningfully since President Donald Trump took office eight months ago, escalating global trade tensions alongside a raft of other policy changes. His persistent pressure on the Fed to lower borrowing costs has also added to the mix.

"Slowdown in jobs growth now comes under very different conditions than the one last summer," Berenberg's U.S. economist Atakan Bakiskan wrote in a note published on Monday.

"This time, a large number of deportations and nearly no border encounters, alongside the stripping of work rights for more than half a million immigrants, results in no expansion in the labour force, or possibly even contraction," he explained.

Additionally, "the Fed has already cut by 100 bps since September 2024, so monetary policy already is less restrictive – based on the Fed's 3% neutral rate estimate."

(Medha Singh)

*****

EARLIER ON LIVE MARKETS:

WHAT'S IN STORE FOR THE DOLLAR ONCE THE FED STARTS CUTTING? CLICK HERE

FIXER-UPPERS: FED DAY HOUSING DATA CLICK HERE

U.S. INDEXES MIXED WITH TECH, DISCRETIONARY DRAGGING CLICK HERE

TESLA'S REBOUND: MUSK’S GRAND VISION AND THE ROAD TO $8.5 TRILLION CLICK HERE

NON-RECESSIONARY RATE CUTS: THE SWEET SPOT FOR GLOBAL MARKETS CLICK HERE

RBC UNPACKS THE LOGIC BEHIND STAPLES SECTOR TURBULENCE CLICK HERE

INTRADAY TACTICS AROUND THE FED DECISION CLICK HERE

CAN THE RALLY IN GOLD BE STOPPED? CLICK HERE

UBS SEES 'LARGE MONEY POOLS' WADING BACK INTO EUROPE CLICK HERE

SAP BOUNCE HELPS TECH, STOXX STEADY CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES STEADY ON FED DAY CLICK HERE

FINALLY, THE FED CLICK HERE