No se prevén recortes en la próxima reunión de la FED, por los datos que van saliendo

The strong September jobs report and cautious comments from Federal Reserve officials have left Fed watchers with the sense that further interest-rate cuts are not necessarily baked in the cake.

"I still think that more rate cuts will be needed, but they may not come in the one-two punch in the next two meetings," said Avery Shenfield, senior economist at CIBC World Markets.

"We might see one late this year, and one in the first quarter or even two in the first quarter of next year," Shenfield said.

After the surprise half-a-percentage point rate cut announced Sept. 18, taking the federal funds rate down to 4.75%, markets and economists have expected a quarter-point reduction to be the end result of Fed's next meeting, scheduled for Oct. 30-31.

But since then, economic indicators have not been as unambiguously weak as many had been anticipating.

Indeed, the odds of a cut in the Fed's overnight target rate by the end of October fell to 46% from 72% earlier, according to prices in the Chicago Board of Trade's federal funds futures. The market's now pricing in one further rate cut by the end of the year and a 40% chance of a second cut, compared with two rate cuts priced in earlier.

The September job report showed job growth was stronger than expected over the past three months. See full story.

"As we get each report that defies the slow-growth scenario, I think we have to diminish the likelihood that credit-market turmoil is going to translate to some sort of consumer or business panic," said Mike Englund, chief economist at Action Economics in Boulder, Colo.

Against this backdrop, some Fed policymakers might well rue that they eased by fully half a point a little more than two weeks ago, Englund said.

"Those who want to see continued easing are going to find they are fighting an uphill battle with some who probably regret that they made the stronger move," Englund said.

Donald Kohn, the Fed's vice chairman, said earlier Friday that the half-point cut may be sufficient tonic to keep the U.S. economy on the right track. See full story.

"Pending further evidence, a 50-basis-point easing was not an unreasonable first approximation of what might be required to keep the economy on a sustainable growth path," Kohn said in a speech to the Greater Philadelphia Chamber of Commerce.

With inflation low, the Fed could reverse the rate cut if it turned out to be larger than needed, Kohn said.

Reading the tea leaves

Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said last week that only if significantly weaker economic data were to surface would he be inclined to support further rate cuts.

"Weaker numbers will not lead me to revise my outlook or my view of the appropriate funds rate target, unless they are much weaker than already anticipated and accumulate sufficiently to generate another downward revision in my outlook," Plosser said. See full story.

And on Thursday, Richard Fisher, president of the Dallas Fed, sounded a warning about inflation, saying that the recent spike in food prices might linger. See full story.

CIBC economist Shenfield said that the Fed might be uncomfortable with the next few consumer price inflation reports. The recent spike in oil prices, with the benchmark crude futures contract above $80 a barrel, will push up the headline number, he said.

Mike Moran, chief economist at Daiwa Securities America, said Kohn's message to the markets boiled down to: Don't expect too much from the Fed.

Moran characterized the Fed's half-point cut as insurance against a sharp economic downturn.

"I see it possible that they could take out additional insurance moves and if they are not needed, they could take them back next year," he said.

"But I agree that the message from Kohn was that they have not entered an aggressive easing cycle," he said.