FOMC minutes showed members remain divided on policy – UOB

Senior Economist at UOB Alvin Liew assessed the recent publication of the FOMC minutes of the September meeting.

Key Quotes

“The September FOMC minutes showed most Fed policy makers supported a 25bps rate cut to a range of 1.75-2.00% in that meeting. They were generally more concerned about trade policy uncertainty and risks, and external headwinds to the US economy, and they also agreed that “policy was not on a preset course.” But there was little consensus beyond that, and policy makers were divided on the future path of US monetary policy. The minutes were certainly consistent with the spilt in policy path outlook reflected by the latest September Dot Plot chart”.

“The Fed policy makers also discussed about the developments in US money markets and measures that helped ease the strains in these markets. Policymakers agreed recent money market developments implied the Fed should soon discuss the “appropriate level of reserve balances” but “should be clearly distinguished from past large-scale asset purchase programs” (i.e. not another QE program). FOMC Chair Powell (8 Oct) said the “time is now upon us” to expand balance sheet to maintain appropriate level of reserves and he specifically emphasized that the growth of balance sheet for reserve purposes should not be confused with quantitative easing”.

“Despite the split in in policy path outlook among Fed policy makers, a key consideration is that there has been a weakening in US economic data after the September FOMC, and that has reinforced expectations for more monetary policy easing. After the two 25bps cuts in Jul and Sep, we still project two more 25bps “insurance” rate cuts at the 29/30 Oct and the 10/11 Dec FOMC, bringing the upper bound of the FFTR lower to 1.5% and well below the 2% inflation target. We have not factored in further cuts in 2020 as we expect some sort of US-China trade deal (i.e. interim agreement) happening by 1H 2020. However, if trade tensions persist well into next year, then we think the Fed will have to take on more easing in 2020, especially if it leads to material downside impact to US and global growth”.

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.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: Bullish case underpinned by weekend news

The EUR/USD pair has rallied Friday to close with gains for a third consecutive week at 1.1169. There was no particular catalyst for EUR gains. ECB scheduled to meet this week, although no fireworks expected this time.


GBP/USD: Uncertainty or relief? Action granted anyway

Hopes that the UK will avoid a hard-Brexit kept the Pound rallying against all of its major rivals by the end of last week, with GBP/USD finishing it a handful of pips below the critical 1.3000 level.


USD/JPY: Corrective slide to continue on sentiment

The USD/JPY pair closed the week at around 108.40, down Friday for a third consecutive day as the American currency remained under selling pressure. USD/JPY at risk of falling further only if it breaks below 108.00.


Gold turns flat above $1,490 as USD remains under pressure

After dropping to a daily low of $1,485, the XAU/USD pair staged a modest rebound during the American trading hours and turned flat on the day near $1,492.

Gold News

China’s downward economic path offers no escape from its trade problems

There were no surprises in China’s GDP figures as the government portrays an economy slipping steadily lower giving little promise of improvement or support for the waning global expansion.

Read more