History predicts another Fed Rate Cut before January

Government bond traders who have predicted 6 of the past 7 recession, say the Fed will lower interests again before January in order to avoid the economy stalling.

Since the Fed dropped the funds rates a half percent last week, traders have pushed the yield on Treasury two-year notes to almost three quarters of a point below the designated 4.75 percent funds rate. In the three previous occasions in the past 20 years when that has happened, borrowing costs have been cut.

“The U.S. economy needs to grow at 2.5 to 3 percent or else it stalls,” said Bill Gross, manager of the $104.4 billion Total Return Fund, the world’s biggest bond fund. “Historically, every time we get close to stall speed the Fed lowers short rates.”