Josh Nye, Senior Economist at RBC Economics Research, points out that the language used by the Federal Reserve in today’s statement, announcing the first rate cut in ten years, left the door open to another rate cut.
Key Quotes:
“The Fed opted for a 25 basis point rate cut today, a move that was widely expected but disappointed some market participants looking for a larger reduction (market pricing showed non-trivial odds of a 50 bp cut).”
“The data don’t make a clear argument for any easing, so we’re at least pleased to see that the Fed didn’t make a more dramatic move. As expected, policymakers cited global developments and muted inflation as justifying a rate cut.”
“While not committing to another move, this language does leave the door open to a follow up cut (our forecast assumes another cut in September). Also of note, the Fed is ending its balance sheet reduction two months earlier than previously indicated.”
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