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The Federal Reserve could soon interrupt its last interest rate cut cycle



The Federal Reserve Building is pictured on August 6, 2019.

Caroline Brehman | CQ-Roll Call Group | Getty Images

The Federal Reserve may soon take a break in its last interest rate cut cycle. Depending on the economic data and the development of trade talks, this could happen at the meeting of 29-30 October or more likely. [19659002] Charles Evans, president of the US Federal Reserve in Chicago, who had strongly supported the last two rate cuts, said this week he saw no further cuts this year, but was willing to consider one if the Data deteriorate. Robert Kaplan, President of the Dallas Fed, said he was "agnostic" about future interest rate cuts. And Fed Chairman Jerome Powell said in a speech last week that many would affirm the market's view that the Fed will cut back in October, that decisions would be taken from one meeting to another, and that it showed up for the future Measures neutral.

Fed Funds futures trading with a 83% interest rate hike, but recent comments suggest that this outlook carries slightly greater risk than currently priced in.

According to the Fed, he has triggered three stimulus rounds: First, he has reversed the course from the planned rate hikes in the last year; Second, it has stopped cutting its balance and has begun to increase in line with economic growth. and thirdly, it cut rates twice by a quarter point.

There may be a third cut that could occur this month or December, but the Fed will wait to see what impact the current incentive will have before continuing. Many said that politicians are willing to cut interest rates as the data gets uglier, but officials say they see politics in the right place, indicating that they believe that politics is the current one economic weakness has been anticipated.

There are barely two weeks left until the meeting and the dates could break one way or the other. Several other Fed spokespeople this week, including the Fed's Deputy Chairman Richard Clarida, and New York Fed President John Williams, could support the market's outlook or defy its certainty. Williams speaks on Thursday.

If there is no interest rate cut in October, the Fed could instead lower rates again or pause again in December. What happens to the trade could be crucial to the Fed's decision. Even a partial agreement between China and the US could eliminate one of the most serious risks to the US economy. However, the Fed will also need to consider the possibility of another failed round of talks that could lead to a stronger slowdown.

Support the idea of ​​a break: The Fed is split over the next step. A break could give the data and developments time to clarify the right policy.


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