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Next week, the FOMC will meet. According to analysts at Wells Fargo, a 25 bps cut to the Fed Funds rate is the most likely outcome, amid low inflation and trade related risks.

Key Quotes:  

“Coming off the first rate cut in a decade, the Federal Reserve Open Markets Committee (FOMC) heads into its September meeting with financial markets not so much considering whether it will cut rates again, but rather by how much and what it will provide in the way of forward guidance.”

“In our view, the most likely outcome for next week’s meeting is that the FOMC will cut the fed funds rate another 25 bps, while continuing to emphasize risks to the outlook from global growth and trade policy and acknowledging that inflation remains below target.”

“With low inflation as a workable justification and with trade-related risks having intensified over the past month and a half, another rate cut in September looks like all but a done deal at this point. Markets are currently pricing in a 100% probability that the FOMC will reduce the fed funds rate next week. For all these reasons, it is arguably less important what the Fed does in September and more important what it will offer in terms of forward guidance.”

“The meeting should keep the door open for additional easing over the next few months.”