Fed Cuts Again, But Dissent Rises

U.S. Review

Fed Cuts Again, But Dissent Rises

• The Federal Reserve reduced the fed funds rate 25 bps this week, continuing to cite economic weakness overseas and “muted inflation pressures.”
• The higher pace of home sales and improving builder confidence should feed through to stronger construction later this year, meaning residential investment should finally contribute positively to GDP growth.
• Manufacturing production rebounded in August, but is still down over the past year.
• The surge in oil prices should have fairly limited effect on the U.S. economy, while the spike in repo rates was largely due to technical factors.

Global Review

Central Banks in the Spotlight

• Central banks were the focus this week, starting with Japan. The Bank of Japan made no major changes to its monetary policy at its September meeting, even as a majority of central banks have shifted to easing monetary policy.
• Elsewhere, the Bank of England unanimously decided to keep policy rates on hold. In addition to holding rates steady, Bank of England policymakers highlighted how uncertainty surrounding Brexit could weigh on inflation expectations.
• Bucking the trend of easier monetary policy, Norway’s central bank caught markets off guard this week with its fourth interest rate increase within the last year.

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