Fed has embarked on monetary policy easing by a 25 bps cut

As widely expected, the US central bank cut its Fed funds target rate yesterday evening by 25 bps to a range of 2.0% to 2.25%. It also announced the early end of the balance sheet reduction by August in order to not give diverging signals

Highlights:

  • Yesterday evening, the Fed cut its Fed funds target rate by 25 bps to a range of 2.0% to 2.25% as widely expected. This was the first rate cut in more than a decade.
  • It justified the cut with global developments as well as a muted inflation outlook while uncertainty is seen to remain high.
  • The FOMC also announced the end of the balance sheet reduction already in August, two months earlier than previous indicated.
  • The decision was not unanimous with two dissenters argued for stable rates.
  • Powell delivered a dovish press conference but undercut market expectations. We continue to expect a further 25 bps cut in September.

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FED HAS EMBARKED ON MONETARY POLICY EASING BY A 25 BPS CUT

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Edited by the Macro & Market Research Team. The team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.
The team translates macro and quant views into investment ideas that feed into the investment process.