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
- 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.