Next Fed Action Could be a Rate Cut

May’s poor U.S. employment report could trigger an interest rate cut, according to one contrarian investor—a move that would upend the Federal Reserve’s plans for policy normalization.

“I’m not convinced the Fed will hike at all; in fact their next move might be a rate cut rather than a hike,” Nicholas Ferres, investment director of global asset allocation at Eastspring Investments, told CNBC’s Asia Squawk Box on Monday.

Eastspring Investments is the Asian asset management business of Prudential and manages $89 billion of assets.

A cloud of uncertainty is hanging over the Federal Open Market Committee’s (FOMC) outlook after data last week showed the country added 38,000 jobs in May, significantly missing the 162,000 expected. The report also highlighted sharp downward revisions in job creation of previous months, with March sliding from 208,000 to 186,000 and April going from 160,000 to 123,000.

The bulk of market observers don’t expect any action when the FOMC ends a two-day review on Wednesday, but expectations for a rate hike are high in the coming months. Four-fifths of the 92 economists surveyed by Reuters anticipate an increase at either the July or September meetings. Ferres disagrees.
“I’m sympathetic to the view that you don’t want to focus on one data point but the downward revisions in employment, combined with the two quarters of negative profit growth were compelling for me,” he explained, referring to the 8.1 and 3.3 percent drops in company profits during the third and fourth quarter of 2015, respectively.

via CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza