Reliance Trading Co. Limited – US Markets Federal Reserve Update

The meeting minutes are set for release at 2 p.m. ET, and come halfway between the Fed's Sept. 17-18 meeting and its next rate-setting session October 29-30.
By: Reliance Trading Co. Limited
WAN CHAI, Hong Kong - Oct. 8, 2019 - PRLog -- The Federal Reserve's minutes from its mid-September meeting will pull back the curtain on the deliberations that led to monetary policymakers second consecutive rate cut this year, and will help hint at whether further policy easing is yet to come.

In September, a divided Fed voted in favor of bringing the benchmark interest rate down a quarter point to a band of between 1.75% and 2.00%. Three officials had voted against the decision, with Kansas City Fed President Esther George and Boston Fed President Eric Rosengren calling for rates to remain unchanged from their previous level, and St. Louis Fed President James Bullard calling for a more aggressive half-point reduction.

In the weeks since the Fed's last meeting, data on the domestic economy has weakened considerably, offering a stronger case for lower rates to help prop up flagging growth. As of Tuesday afternoon, markets priced in an about 80% probability of another quarter point cut to the benchmark interest rate after the October meeting, up from around a 30% probability just a few weeks ago.

Activity in the U.S. manufacturing sector, which has been enduring a well-documented slowdown this year, fell to a 10-year low in September, the Institute of Supply Management said last week. The larger U.S. service sector also saw activity decelerate for the month to a three-year low, stoking fears that a growth slowdown had spilled over into sectors that had previously remained more robust. And the September jobs report came in mixed, with unemployment rate hitting a new 50-year low but job gains coming in at a slightly slower-than-expected pace, with softness especially appearing in retail and goods-producing employment.

The Fed had said in its March monetary policy statement that it would eventually begin increasing its securities holdings "to maintain an appropriate level of reserves." But the temporary repo operations that began last month had left market participants wondering when the Fed would codify a more permanent solution to increase reserves.

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