October 30, 2019

The Fed cuts rates, but further easying requires a deeper slowdown.

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In Short

As expected the Fed cut rates by 25 bps. However, the subsiding of political risks has convinced the Fed to pause easying.
The Fed cuts rates, but further easying requires a deeper slowdown.
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Highlights:

  • As expected the Fed cut rates by 25 bps. However, the subsiding of political risks has convinced the Fed to pause easying.
  • The moderate growth outlook is confirmed as well as that of inflation very gradually converging to the 2% target. The (tentative) softening in global uncertainty has reduced the downside risks to this outlook, which motivated the series of rates cuts.
  • After this hawkish twist, the cut we penciled in for December is likely be moved into Q1 2020, as we expect by then a more pronounced slowdown of the economy.

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THE FED CUTS RATES, BUT FURTHER EASYING REQUIRES A DEEPER SLOWDOWN.

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