Fed to lower rates again by 25bps – TD Securities

Analysts at TD Securities expect the US Fed to lower rates again by 25bp, doubling-down after its first rate cut in over a decade at the July meeting.

Key Quotes

“We now expect the IOER rate to be reduced by a larger 30bp to 1.80%, as growing issues in the repo market led the effective Fed funds rate to trade at (and likely above) the upper bound of the Fed's target range in the past two sessions.”

“In regards to communication, the FOMC will likely continue to characterize the additional accommodation as a "mid-cycle adjustment" or "insurance cuts" and not the beginning of an easing cycle. However, they will not close the door to additional cuts. In fact, we look for another 25bp cut in October and further 75bp of easing in 2020.”

“The dot plot should reflect a number of FOMC voters projecting 75bp of total easing for this year, but not enough to move the median lower to that level. Presidents George and Rosengren should dissent again at the meeting.”