There was a familiar sense of post-Fed deflation on Thursday. No major losses, but rather a low level feeling of disappointment.
As expected, the Federal Reserve cut interest rates for a 2nd time this year – and decade – taking them a quarter of a point lower to 1.75-2%. However, that was the least interesting thing about Wednesday’s statement.
Hinting at an uncertain path going forwards, the FOMC was pretty split about what to do this month: 7 members backed the cut, with 2 voting in favour of holding steady, and one keen for a deeper 50 basis points reduction. Needless to say, Donald Trump wasn’t happy, tweeting that Jay Powell had “no ‘guts’, no sense, no vision!”
The meekness of the move sapped some energy from the global markets. The FTSE fell towards 7300 as it shed around 15 points, with the DAX flat just below 12400 and the CAC adding a handful of points at most. The Dow Jones, meanwhile, is expected to lose 100 or so points when the bell rings on Wall Street, keeping it at the lower end of its recent 27000 to 27250 trading range.
The dollar was also unable to squeeze any real juice from the announcement. Cable crept 0.1% higher, sitting near $1.2475, while against the euro the greenback lost 0.1% as the single currency crossed $1.104.
Central bank fans need not worry – there is still more action to come this Thursday. With the Fed cutting rates, and the Bank of Japan keeping its monetary policy on hold, the Bank of England steps into the spotlight this afternoon in what is sure to be thrilling case of Mark Carney and co. sitting on their hands in the face of Britain’s Brexit logjam.
Elsewhere, UK retail sales are expected to swing from 0.2% to -0.2%, though 9 times out of 10 those pre-release estimates tend to be way off base.
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