The St. Louis Fed’s Financial Stress Index was essentially unchanged at -1.189 in the June 7 week after-1.190 in the prior week. Stress levels were much the same as seen in late February as effects of the partial federal government shutdown ebbed and remain below those seen in November and December when a plunge in the stock market called into question the health of financial markets at a time when the Fed was still raising rates.
Some of the let up in increased stress is the conviction that the Fed will soon offer up a so-called “insurance” cut in rates to keep a possible economic downturn at bay. A rate cut probably isn’t the done-deal that markets are anticipating, but policymakers are leaning more toward increasing accommodation at present than they are planning another rate hike any time soon.
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