- Fed expected to cut the bank rate by 25bp
- Fed balance sheet has been increasing of late via the repo market showing signs of easing
- SP500 hit all time highs last week off of the back of expected cut
The FOMC meets today to set the Fed Funds target range.
It currently sits at 175-200bp with the expected cut to take the range down to 150-175bp.
This comes after more presidential pressure from Trump last week, but with the Fed introducing longer term repo programmes, firstly going from overnight and extending now to 14-day, the market is expecting the Fed to cut and probably announce more large scale asset purchases in the current months.
With US inflation currently sitting at 1.7% and unemployment remaining steady, there are few real reasons for this cut if the Fed is looking at data dependence only, which would leave the only case remaining that they are looking for downside insurance for further global market stress.
With Brexit looming, no resolution to the trade talks, more geopolitical instability in the Middle East, South America and Hong Kong and European banking issues, it is likely that this is the case.