The Federal Reserve Bank of San Francisco is observing a cautious approach affecting growth but not halting it entirely. There is concern about the declining trend in prime-age male labour force participation.<\/p>\n
Mary Daly, the Bank’s President, discussed the potential need for policy adjustments in the upcoming months. The situation may prompt consideration for rate cuts to address economic challenges.<\/p>\n
We are being told that policy will likely be adjusted in the coming months, which points directly to interest rate cuts. This dovish stance is a response to economic growth that is clearly tempering, as seen in the advance estimate of 1.5% GDP growth for the second quarter of 2025. These signals suggest the Federal Reserve wants to act before a more significant slowdown takes hold.<\/p>\n
The concern over the prime-age male labor force participation rate, which the latest jobs report showed dipping to 87.5%, adds to this narrative of a cooling economy. With the July Consumer Price Index showing inflation easing to 2.4%, the path is clearing for the Fed to make a move. We see this as giving them the green light for preemptive cuts, especially as the inflation rate trends closer to the 2% target.<\/p>\n
In the derivatives market, this means positioning for lower short-term rates, which is already being reflected in SOFR and Fed Funds futures. Currently, markets are pricing in an 85% probability of a 25 basis point cut by the September FOMC meeting, making long positions in these futures a direct play on this view. We should also watch for a potential decline in market volatility if investors see these moves as stabilizing.<\/p>\n
For equity traders, this environment could be very supportive, much like the “mid-cycle adjustment” we saw back in 2019. Buying call options on major indices like the S&P 500 could be a way to capitalize on a potential rally fueled by easier financial conditions. This strategy allows for defined risk while capturing upside from the anticipated policy shift.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" San Francisco Fed eyes possible rate cuts amid cautious growth and falling prime-age male labor participation.<\/p>\n","protected":false},"author":62,"featured_media":17028,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-28412","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t