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Waiting with Baited Breadth

Updated: Feb 2, 2020

“This meeting will present a delicate balancing act for the Committee in that they will have to acknowledge that inter-meeting developments point to a diminished outlook over the second half of the year but will not yet have enough information to come to a consensus on whether the slowdown is transitory or persistent,” Justin Weidner, economist for Deutsche Bank, wrote in a note.

“While we do not expect the Fed to cut rates at this week’s meeting, we believe the language of the meeting statement, diminished forecasts in the SEP [Summary of Economic Projections], and the tone of Powell’s press conference will move in a decidedly dovish direction,” he added.

The Fed’s decision comes after European Central Bank (ECB) President Mario Draghi on Tuesday gave a speech signaling further stimulus – or easier monetary policy would be warranted in the even of further economic deterioration. The comments sent European equities higher and the euro lower.

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