US Fed Heightens Chances of 25bps Rate Cut

9th of August, 2019

With US Non-Farm payrolls undershooting market expectations Friday, US Federal Reserve Chairman Powell indicated  25bps cut is likely at their next meeting.

After debate in markets recently centred around the size of cut to the US Federal Funds rate, Chairman Powell provided come clarity to the US outlook by indicating the Fed Board would have little reason to expect a cut larger than 25 bps. It appears the Fed is still of the mindset of maintaining the expansion and would once again make a mid-cycle adjustment to policy at next weeks meeting.

The Fed, much alike the RBA are verbalising the risks they see for their outlook. As trade tensions remain high and growth lacklustre at best in many economies, central bankers appear to be making preemptive steps to shore up their local economies against any shocks that may arise as these geopolitical tensions either come to a resolution or drag on for the foreseeable future.

We have a relatively quiet week in local data with the main item being the NAB business survey out Tuesday. Given the sparsity of local data we will likely see another week of markets at the mercy of offshore headlines, luckily with China still preparing for their 70th anniversary celebrations escalations in the Trade War are expected to be delayed for the next few weeks.

Matthew Dunshea

Client Relationship Manager