Tag Archives: Fed dovishness

We now see a 25bp cut on 31 July (versus in December in the main scenario prior), followed by another 25bp cut on 18 September.The role of politics including President Trump’s pressure to cut rates (and his call to dismiss Powell) and the anxiety ahead of the G20 summit on 28-29 June – particularly the crucial Trump-Xi meeting – has been even more impactful than we expected (we were wrong!), leading Chairman Powell to signal more firmly an imminent rate cut.This political noise adds to the...

The Fed enters the 'acceptance stage' regarding its debt and market dominance monetary regime.The US Federal Reserve (Fed) is further reinforcing its stance on ceasing its balance sheet shrinkage before year end, essentially yielding to the demands of markets, which have been anxious about the potential for market liquidity shrinkage. Officially, the balance sheet question is still rooted primarily in the technical – commercial banks’ high demand for safe, liquid assets – rather than...

In spite of the federal shutdown and the loss in growth momentum in other countries, the US continues to churn out jobs, while a dovish Fed may prolong the economic cycle.US employment rose by a solid 304,000 in January (+1.9% year on year, y-o-y), compared with 222,000 in December. The three-month average was a healthy 241,000/month. Meanwhile, the ISM manufacturing survey rose to a robust 56.6 in January from 54.3 in December.Overall, these two pieces of data suggest that US macro momentum...

Hints that Fed balance-sheet reduction could in question.Fed Chairman Jerome Powell made dovish remarks at a conference on Friday to the effect that the Fed would be ‘patient’ about further rate increases after having delivered four rate hikes in 2018.Crucially, Powell mentioned possible tweaks to the Fed’s preset plans for balance sheet shrinkage to calm financial markets concerns, after downplaying the balance sheet aspects at the December post-policy meeting press conference.This...