Fed likely to cut rates

  • Fed could cut by 25bp
  • Unlikely to cut by 50bp but it has become more and more priced in
  • Possible this meeting is highly politically charged

The Federal Open Market Committee meets this evening to discuss monetary policy going forward.

With pressure from Donald Trump on the Fed, this could be a very important turning point for markets going forward.

With the yield curve inverted, this could be a play to stave off recession for as long as possible by easing the markets, but it totally depends on how participants take the dovish signalling as to whether markets remain elevated or decide to sink.

As of writing, the 10yy is trading at 2.06%.

A ‘disappointment’ of no cut would likely lead to the 10yy pushing to the upside and therefore upwards pressure on the dollar, but with the Treasury’s fiscal expansion occurring over the next 6 months, the market is likely to take this as bullish dollar due to a reduction in USD liquidity.