Fed officials keep door to 50bp cuts open

Fed officials continue to keep the possibility of a 50bp on the table.

Yesterday’s comments from Daly sounded similar to that of Powell that they don’t want to see further weakening of the economy and labour market from here.

Even though she said it’s reasonable to adjust policy at the normal cadence (25bp cuts), she also added that if more weakness should happen, she anticipates the Fed would ‘need to be more aggressive’ (50bp cuts).

How the markets take that first cut will be dependent on the incoming labour data, but how markets view the cut will be important for how markets react to it.

Will they view a 50bp as a bigger insurance cut (which could be good for equities), or as emergency cuts (which could be bad for equities). I personally think 50bp cuts will send the wrong message, but time time will tell.

This article was written by Arno V Venter at www.forexlive.com.