Mr Duy on Fed

This is another big FED week, but everybody seems to expect the same outcome … per Mr. Duy (seems consistent generally with others) – quote:

I think the Fed will be attempting to signal that absent a substantial improvement in the data, the ongoing risks will justify another 25bp rate cut (it would still be a hard sell for the hawks) and that this is expected to be that baseline scenario. But anything more than another 25bp requires more evident deterioration in the outlook or an intensification of risks.Powell will not want to feed into any perceptions that the Fed is already locked into 75bp or more of easing.

Bottom Line: Look for 25bp from the Fed this week with a signal that they are prepared to do more but that they remain data dependent and are not committed to a specific policy path.

When ‘everybody’ expects same outcome, the risk impact of a different outcome is very, very high … it’s just the probability of a different outcome keeps shrinking, lowering the risk.

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