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Senior Economist at UOB Group Alvin Liew assessed the latest publication of the FOMC minutes.

Key Quotes

“In the latest minutes, markets did not get much new insights on what would change the outlook for the Fed Reserve policy rate trajectory. FOMC policy makers regarded current rate stance as likely to remain appropriate for ”a time”, helping to reinforce expectations for a Fed policy cycle pause after three sequential 25bps rate cuts in July, September and October but provided little else in terms of new information.”

“Similar to market expectations, we too subscribe to the view that the Fed Reserve will stay on pause in its upcoming 28/29 January 2020 FOMC. But in contrast to the view of a more prolonged Fed pause, we still expect the Fed to implement the next 25bps rate cut in 1Q 2020 which will be at the March FOMC, and thereafter to stay on pause again for the rest of 2020. The factors determining our Fed policy outlook is still the international trade developments and now, the additional factor of US-Iran developments.”

“Conversely, if the trade negotiation progresses smoothly into 2020 and the US-Iran tensions does not boil over into a full-fledged military confrontation, then the “insurance” cut will be unnecessary. The view remains for the Fed Reserve to keep policy rates low or even lower in 2020”.