US Fed cuts interest rates - Analysts react

By Alexander Bueso

Date: Wednesday 18 Sep 2019

US Fed cuts interest rates - Analysts react

(Sharecast News) - "We are baffled by the lack of change in the economic forecasts for 2020. [...] The overriding message here, then, is uncertainty, which has generated forecasts showing that not much will change in either the economy or policy. Probably, this will turn out to be wrong, but it's just not possible to say with any confidence in which direction, or when." - Ian Shepherdson, Pantheon Macroeconomics

"The Federal Reserve has delivered another 25bp rate cut, but has provided a confused message of upwardly revising its GDP forecast despite being concerned about growth while ignoring the recent pick-up in inflation completely. Moreover, there is no consensus on additional rate cuts being needed." - James Knighhtley, ING

"The Fed voted to cut its key policy interest rate by an additional 25bp today, to between 1.75% and 2.00%, but the FOMC is more split than ever over what to do next - with close to one-third of the FOMC looking for another rate cut before year-end, while close to another third disagreed with today's rate cut and might even want it to be reversed again within the next three months. Further illustrating that split, two officials - George and Rosengren - voted for no change today while another - Bullard - voted for a 50bp cut." - Paul Ashworth, Capital Economics

"Initial market reaction has seen both the US dollar and Treasury yields move a little higher. As today's rate cut was already fully priced that move probably had little impact. Less certain, however, was the guidance the Committee would give on its future actions. The outcome of that was a disappointment for markets that are priced for at least two more 25bp rate decreases over the next twelve months, because while the Fed has left the door open for further easing its signal was less than emphatic." - Lloyds Bank

"Real capital growth and real economic activity are driven by long-term interest rates, which are functions of expected future inflation and investor confidence. That's why a cut in short-term rates is unlikely to fuel business investment and manufacturing. Uncertainty around the global economy and the impact of the trade war has killed any appetite to invest. We've had relatively low rates for some time already, and they've spurred stock buybacks rather than huge corporate investment." - Dr Kerstin Braun, Stenn Group

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