Singapore Banks - UOB Kay Hian 2024-08-26: Jackson Hole Symposium – The Time Is Now

• The Fed has switched emphasis to supporting the labour market as “confidence has grown that inflation is on a sustainable path back to 2%”. The new chapter on rate cuts has commenced. We reduce DBS’s and OCBC’s 2025 earnings forecast by 1.6% and 1.1% respectively.
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The start of the easing cycle.

• Jerome Powell’s speech at the Jackson Hole Symposium gave assurance that the Fed would commence the widely anticipated first rate cut on 18 Sep 24. The timing and pace of rate cuts would depend on incoming data.
• We expect two rate cuts of 25bp in 2H24 (previous: one rate cut of 25bp) and four rate cuts of 25bp in 2025 (unchanged). We expect one rate cut of 25bp every alternate FOMC meeting.
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From overheated tocooling rapidly.

• The US economy added 114,000 jobs in Jul 24 (Jun 24: 179,000), significantly lower than the average of 215,000 over the past 12 months. This is the second month of weakness in job creation following the soft patch in Apr 24 when 108,000 jobs were added. The unemployment rate also rose 0.2ppt m-o-m to 4.3% in Jul 24, the fourth consecutive month of rising unemployment.
• The dismal numbers raised concerns that growth in the US economy has started to decelerate.

Jackson Hole Symposium: A switch in emphasis.

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Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2024-08-26 SGinvestors.io

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