First rate cut since 2008 ; future rate cuts will depend on the trade war
Please find below our thinking about last FOMC:
- The FOMC announced the first rate cut since 2008 => this quarter point decrease was widely expected.
- They also announced the end of the balance sheet unwind, two months before the initial plan => Not 100% expected, slightly dovish
- Mr Powell suggested this move was a small adjustment meant to help economy weather uncertainty (coming mainly from the trade war)
- Both Rosengren and George voted against Wednesday’s decision => not expected, slightly hawkish
- Mr Powell didn’t look comfortable when questioned about future rate path ; He said it is not “the beginning of a long series of rate cuts” but he didn’t say “it is just one”.
We don’t read this FOMC as particularly hawkish as Mr Powell almost precommit to as least a second rate cut before year end. At the end, the decision will depend on the evolution of the trade war and macro-economic data, which is no news to us.
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