Is the Fed Done With Rate Cuts For This Year?
Recent comments from Federal Reserve officials suggest that the US central bank may be hitting the pause button on rate cuts.
Recent comments from Federal Reserve officials suggest that the US central bank may be hitting the pause button on rate cuts. Although financial markets are widely anticipating one more rate cut by the Fed in the upcoming meeting this month, latest remarks from policymakers hint that there may be no more need for additional cuts, at least not this year.
Chicago Fed President Charles Evans and Dallas Fed President Robert Kaplan commented recently on how they felt the Fed may not cut interest rates again this year. In addition, last week, Fed Chairman Jerome Powell had also hinted that the Fed could take a neutral stance in October’s meeting.
Although the Fed announced two rate cuts so far this year – one in July and another in September, the Fed also counts other steps like reducing its balance sheet to better align it with economic growth as a way to support the US economy. Moreover, an improvement in the trade war sentiment as both the US and China work towards signing a partial trade deal soon are also supporting the likelihood of the Fed moving away from a dovish stance.
In case the Fed doesn’t announce a rate cut in October, markets will expect the central bank to cut rates in its December meeting. However, the recent signs are pointing to a ‘wait and watch’ approach to get a better understanding of economic data releases and updates around the trade deal to influence the decision for another rate cut in the near future.
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