The strategists recommended that investors position for a pause by the Fed next month by paying the rate on the overnight index swap contract corresponding to the Fed’s December rate decision. They first endorsed the trade on Nov 5 when the rate was 4.404%, and it has since climbed to about 4.46%, at which level it prices in just under 50% odds of a quarter-point rate cut.
Interest-rate strategists at Citigroup Inc. say the Federal Reserve should pause its interest-rate cuts, further isolating the bank’s economists, who’ve stuck with a call for a half-point move in December long after others on Wall Street abandoned it.
“We believe that the Fed should put easing on hold, barring weak payrolls data in December,” strategists Jabaz Mathai and Alejandra Vazquez said in a Nov 22 report, referring to the US employment report for November slated to be released on Dec 6. And even if job creation is weak, “it can be argued that other labour market data such as jobless claims are indicating a resilient labour market.”
