25bps rate cut but a dovish surprise will be hard to achieve.
Please find below our expectations regarding the upcoming FOMC meeting on September 18th:
- We expect the Fed to cut rates by 25bps.
- The decision to cut is however unlikely to be unanimous with George and Rosengren likely to dissent once again.
- The 2019 median dot will be worth watching and it is likely to be at 1.875%, meaning no more cuts this year.
- Language won’t likely change significantly, with reiteration of “act as appropriate” and “mid cycle adjustment.”
- Economic forecast:
- GDP: 2019 growth will likely stay at 2.1% (carry-over effect of 1.94% growth at end of Q2);
- Inflation: 2019 core PCE will likely stay at 1.8%.
- REPO: it has been one of the main topics this week; the Federal Reserve may deliver a 30bps IOER cut in order to keep the effective Fed Fund rate within the target range.
All in all, we see US rates and the US dollar slightly higher following the FOMC.
This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.