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Fed expected to lower interest rates a third time

Oct. 27, 2019 9:32 PM ETBNKU, BNKD, BNKO, KNABBy: Douglas W. House, SA News Editor26 Comments
  • The financial markets have priced in a 1/2% rate cut in the U.S. ahead to this week's FOMC meeting. If so, it will be the third consecutive reduction by the Fed as it tries to stoke growth. Some observers question the wisdom of the moves since rates are already low, the benefits uncertain and the risk of encouraging excesses in certain areas of the sector.
  • The central bank lowered its overnight lending rate by 25 basis points in July and again last month so another cut by the same amount could be the outcome. President Trump has been vocal in his desire to see a more aggressive cut of 1%.

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Comments (26)

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Wolfstar profile picture
This must be a joke. All time market highs and we need rate CUTS??? Market as an obscene balloon waiting to implode and they want to pump it up even further? People can’t be satisfied with a good run they have to keep pushing it until it all collapses. And then it will be real bad and it won’t be after the election either. Be lucky to make the first of the year.
25 basis not 50
.25% but certainly not .50% at this point.
28 Oct. 2019
The market is only pricing in about 23bp of a rate cut this week not a 1/2%. Fed funds futures show about a 91% chance of a 25bp cut and a 9% chance of no change. The same futures show about a 22% chance that the Fed funds rate will be 50bps lower after the December meeting.
I doubt they cut in December to be honest.
Minutemen profile picture
The rate cuts at this point are nothing more than political moves by Trump and GOP to keep the economy from slowing into a recession before election. Stocks are already near record highs and further rate cuts aren't going to stimulate much more stock buying. The only benefits for lower rates at this point are for home buyers and the federal government's burgeoning debt.
Proud Capitalist profile picture
Hey Minutemen, I assume you think that all the rate cuts under Obama were political moves by Obama as well, correct? The reality is Obama received rate cuts adding up to 3.25%, with only ONE cut of 0.25% before Trump was elected. Hmmm. Yet as soon as Trump won the election, miraculously the Fed suddenly felt it urgently needs to start raising rates...EIGHT increases in just the first two years after Trump is elected, or over 2%. Any rational, honest person should see that Obama and Obama people in the Fed were playing politics...not raising rate rates to prop up the economy and swing the election in Democrats favor, and then doing the opposite once Trump was elected. Don't be a fool...you should be condemning deep state people in the Fed, not Trump. The evidence is so obvious a child could see it. Most of the world is not showing much growth, except the US. Rate cuts are needed to help the US fight the contagion of poor economic growth elsewhere. Trump is right to argue for cuts...because its the right thing to do.

I thought I had seen it all until I read this one...
Minutemen profile picture
@Proud Capitalist

Maybe you weren't born yet back in 2009, but there was a HUGE recession that tanked the economy and led to near double-digit unemployment rates. It such circumstances, it is normal for the Fed to lower interest rates to stimulate the economy and to increase liquidity in the markets. That was a success. However, now that unemployment has improved to near record lows and the stock market is at all high time highs (and liquidity is flush), there is no need for further increases.

The only point in lower rates now is to try to keep the economy from sinking due to Trump trade polices until after the election.
Pardon me for finding all of this hilarious after Powell was jawboning "3 or 4 rate rises for 2019" PLUS continued QT.Now we have rate cuts coming in and the "not QE4 only a temporary measure" repo rescue.Somehow all of this is not inspiring confidence in the future for me.
It doesn’t get much more non-functional than the Fed.
userwcSX profile picture
"It doesn’t get much more non-functional than the Fed."

What's the difference this time? Is it a quisling driving the economy off a cliff and threatening to fire people?
I guess we'll just have to have a negative rate once the recession happens
Teutonic Knight profile picture
So in a nutshell, what is the impact of negative rates on mortgages, merit, and REIT?
mlonz profile picture
Recent action in gold signals .5% is not priced in.
Transcend Event Driven Research profile picture
It's about time!! We need more than 25 bps! Fed needs to wake up! WE NEED 100 bps cut NOW!!
ArbLover profile picture
Not going to cut, and that will be just fine. In fact, when they don't cut I doubt there is much movement in the market either.
userwcSX profile picture
Remember when Obama tried to browbeat the Fed into a 100 basis point cut?
Just end the suspense and go to zero already. It's not a question of if but simply when we get there. Oh and don't forget the notQE for God's sake. If in doubt simply consult the Yellen/Obama playbook. Dow 40k here we come! Don't miss out on the free money everybody!
Teutonic Knight profile picture

More like 50,000 as Money is awash everywhere even in the side curbs of the streets

We have tons and tons of money looking for parking spaces and myriads of offers of unsecured LOANS ARE IN THE MAIL, CHECK YOUR MAILBOX
Teutonic Knight profile picture
As expected, Trump and Powell are putting all stops to alleviate a Recession before the 2020 election.

A 1/2 pint cut is a Strong Dose!

Why? Same old, same old, the same old playbook during the Obama Regime. The Executive Branch has it in its hand to wield the necessary power to hang onto power.

A Recession at this time or 6 months from now will in no doubt go a long way to topple the incumbent Administration.--- a NO-NO when stocks, college endowment funds, mortgages, housing prices, the unemployment rate will soar.

Expect a Recession in February of 2021.
They are not cutting 50 basis points with 3.5% unemployment and with a deal with China on the horizon they may not cut at all but if they did it would only be 25 basis points at most.
Correct. The 50 basis point cut mentioned in this article is a mistake.
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