Sign in
Research link-chevron Created with Sketch.
link-chevron Created with Sketch. Products and Services link-chevron Created with Sketch.
link-chevron Created with Sketch. Products and Services
Economics link-chevron Created with Sketch.
FX Report
The Loop
Inside China
Insights & Strategy
Equities link-chevron Created with Sketch.
Corporate Commissioned Research
Analysts
Analysts
Help and Support
Help and Support
Corporate and Investment Bank
Standard Bank Group
20 June 2019

Fed seen easing in July

Shireen Darmalingam

  • The Fed’s FOMC kept the Fed funds rate unchanged last night. However, the bank’s statement abandoned the “patient approach to monetary policy”, with the Fed now seemingly endorsing the case for rate cuts after a decade of not doing so.
  • Still, the bank flagged a number of uncertainties in the outlook, saying that “in light of these uncertainties and muted inflation pressures, the committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”
  • The Fed’s dot plot has typically been used to signal policymakers’ anticipated path of interest rate increases. Recall, the March Fed dot plot of interest rate projections implied rates that would be left unchanged this year. In December though, the Fed seemed to indicate two increases.
  • However, the Fed now seems to be supporting market expectations of a July rate cut, with investors now fully pricing in 25 bps.  
  • The Fed cut its inflation forecast last night. Personal consumption expenditure (PCE) is now expected to slip to 1.5% in 2019, from a previous estimate of 1.8%. Core PCE, the Fed’s preferred measure of inflation, is also seen moderating, to 1.8% in 2019, from a previous estimate of 2.0%.
  • The GDP forecast was left unchanged at 2.1% for 2019 and 2% for 2020.

Read PDF