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Joe Biden’s hopes of a pre-election rate cut were dealt a blow on Thursday after inflation and growth data led investors to push back expectations of a move by the Federal Reserve.
According to futures contracts, investors are now no longer fully confident that the Fed will deliver its first quarter-point reduction by September.
They are instead now only fully pricing in such a move by the central bank’s November 6-7 meeting, immediately after the November 5 election, when Biden is set to face his Republican rival Donald Trump.
The shift came after inflation-adjusted growth figures came in well below expectations at an annual rate of 1.6 per cent for the first quarter.
The data also showed that the Fed’s preferred metric of underlying inflation jumped to 3.7 per cent from 2 per cent in the final quarter of last year — exceeding forecasts of 3.4 per cent.
March numbers for the measure, the core personal consumption expenditures index, are due to be published on Friday.
Biden has been hoping the economy will help him overtake Trump ahead of November’s vote, but borrowing costs are still at a 23-year high.
Traders now give a roughly 75 per cent likelihood to a Fed rate cut by September, compared with close to 100 per cent before Thursday’s data release.
Market expectations of cuts have shifted dramatically in recent months, with some investors even betting on…
