After running valiantly to reach the lowest yields in the last six months, interest rates are taking a breather this week.  It’s a healthy break and will allow the bond market to store up energy that will enable interest rates to move a leg lower a few weeks from now.

Next week’s Retail Sales and Consumer Price Index will help determine the speed at which interest rates drop.  Members of the Federal Open Market Committee have mixed feedback about when they should start lowering their overnight Cost of Funds Index. While come are calling for an emergency meeting prior to Sept. 18th to cut interest rates immediately by 1/2%, others aren’t convinced that inflation will be under control enough by then to warrant the rate drop.  All in all, CME’s FedWatch Tool still forecasts a 100% chance of a rate cut at the September meeting.  Odds are at 50/50 whether that reduction is 1/4% or 1/2%.  Either one will be welcome relief, signaling the end of this two year elevated cycle.