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FOMC to stay put at 1.50-1.75% in December – Standard Chartered

“We expect the FOMC to stay put at 1.50-1.75% in December, instead of our previous call for a 25bps cut in the fed funds target rate (FFTR),” said Standard Chartered economist Sonia Meskin.

Key quotes

“The main reason for the change in our call is the shift in the FOMC’s tone, rather than the economic outlook. We believe US growth will decelerate into year-end; the latest retail sales, industrial production and PMI data point to slower momentum – but forward-looking indicators suggest stabilisation in early 2020. We expect the Fed to continue to focus on money-market dynamics into year-end.”

“For the rest of the year, we expect the FOMC to focus on ensuring the smooth functioning of the money markets. In 2020, political risks may intensify as the US heads into elections, and we expect the Fed to be extremely wary of appearing to succumb to pressure from either party. As long as growth is close to trend and risks of external shocks are moderate, we expect the FOMC to remain on hold through the rest of 2019 and in 2020.”

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