Analysts at TD Securities are expecting the US Fed to lower rates again by 25bp next week, doubling-down after its first rate cut in over a decade at the July meeting.
Key Quotes
“We also expect the IOER rate to decline by 25bp, as the effective Fed funds rate (at 2.13%) remains well-below the upper bound of the Fed's target range. In explaining its decision, we anticipate the Fed will emphasize that the factors that led them to ease last month have failed to dissipate. In fact, global growth remains disappointing and trade uncertainty has only increased.”
“We also expect the FOMC to continue to characterize the additional accommodation as a "mid-cycle adjustment" or "insurance cuts" and not the beginning of an easing cycle. However, they will not close the door to additional cuts, and we look for another 25bp cut in October and further 75bp of easing in 2020.”
“Our view on an October cut relies on the 1998 insurance cut scenario, when the Fed eased rates 75bp at consecutive meetings. Furthermore, research cited by the Fed argues for easing sooner given the proximity to the zero lower bound. A new escalation in the US-China trade war, which led to higher tariffs in the intermeeting period, has clearly raised the stakes and is a notable new development for the Fed.”
“Chair Powell had judged those risks as having "returned to a simmer" in July. This was also flagged by Vice Chair Clarida, who noted that "the global outlook has worsened" since the FOMC last met. The recent rapprochement between US and Chinese officials may ease concerns, but the uncertainty on the trade front should continue to linger.”
“On net, we believe that foreign and domestic developments since the July meeting are supportive of additional easing by the Fed in September.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.