US: Inflation reports clear the way for the Fed to cut rates in October – Wells Fargo


Analysts at Wells Fargo, expect the Federal Reserve to cut rates in October and then two more times. They point out the recent announcement of the Fed to buy Treasuries did not push US yields lower. 

Key Quotes: 

“Fed Chairman Jerome Powell disclosed that the Federal Reserve would resume bill purchases in order to help stabilize the overnight funding markets. Powell was quick to note that this did not mark the beginning of another round of Quantitative Easing but rather was aimed at simply bringing stability to the short-term funding markets. Banks appear to be using reserves differently in this cycle, requiring the Fed to maintain a larger balance sheet than previously thought. The Fed’s move should help prevent a more significant liquidity crisis that might cause real trouble for the economy from developing. But the Fed also does not want anyone to interpret this move as an easing. Given the rise in yields this week, it appears the market is taking the Fed at its word.”

“The slightly better than expected inflation reports clear the way for the Fed to cut the federal funds rate by another quarter point at its October 29-30 FOMC meeting. We would expect to see one or two dissents, as FRB Kansas City President Esther Georgemade it clear this week that she does not see anything in the inflation data that would indicate that inflation expectations have shifted toward disinflation or deflation. We continue to look for two more quarter point cuts, as the Fed sees the current environment reminiscent of the late 1990s, when slower growth overseas caused the Fed to cut the federal funds rate three times, a total of 75 bps, which then reignited growth and allowed it to hike rates later in the cycle.”

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.

EUR/USD News

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.

GBP/USD News

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.

USD/JPY News

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

Forex MAJORS

Cryptocurrencies

Signatures