- Fed to deliver another 25bp cut before year’s end to combat the lingering headwinds of weaker global growth.
- Trump comments on the Fed that cut 25bp, was widely expected and priced in.
US President Trump explained that the Federal Reserve should have acted faster but said today’s action is fine.
Fed was priced in, so the focus was on forward guidance through the dot plot and press conference:
The Federal Reserve cut 25bp for the second time this easing cycle, to 1.75-2.00%. At the press conference, Powell described the cut as insurance against ongoing risks. But the decision was not unanimous and officials were split over further action from here. Analysts at ANZ Bank explained that a 25bp rate cut was widely expected and priced in, so the focus was on forward guidance through the dot plot and press conference.
“The median dot plot projects the fed funds rate to remain around current levels before normalising from 2021. The door was left open for another rate cut this year but officials were split – seven of 17 officials saw the need for a further 25bp cut this year, and no official forecast more than one rate cut from here. We expect the Fed to deliver another 25bp cut before year’s end to combat the lingering headwinds of weaker global growth and elevated geopolitical uncertainty. The Fed also cut the IOER by 30bps, a temporary fix for the recent volatility in US money markets, but a case for more reserves in the system (ie growth in the Fed balance sheet) was acknowledged at the press conference.”