New evidence has been mounting that the Federal Reserve could soon take a break in its latest rate-cutting cycle, and, depending on economic data and developments in trade talks, that could happen at, or more likely, after the Oct. 29-30 meeting, say experts.
Chicago Fed President Charles Evans, who had championed the last two rate cuts, said this week he foresaw no future cuts this year, though he’s open to one if economic data worsen. Meanwhile, Dallas Fed President Robert Kaplan said he’s “agnostic” on future rate cuts, and Fed Chairman Jerome Powell, said in a speech last week, that decisions are being made as needed, appearing disinterested on future actions.
Some economic experts agree that given Powell’s prior comments that a “mid-cycle adjustment” may be warranted, the interpretation might mean that easing could result in the midst of continued economic prosperity.
“There’s so many swirling headlines to be able to tell what the market is paying attention to minute to minute here. The algos are going to take the next hundred points one way or another… J Powell is a lawyer. J Powell is lawyerly. He speaks like a lawyer. He is careful. But if he says that this is a mid-cycle adjustment, those words are being chosen carefully. He might go to an easing. He hasn’t done that yet. And I think the pause is here,” said Michael Farr, CEO and president of Farr, Miller and Washington on CNBC
“So you have to say, is it the ISM that has been the weakest in three years? Or is it positive trade headlines that are going to dictate his further action going forward, when you’re talking about J Powell,” added trader Steve Grasso on the same show.
Failing an October rate cut, the Fed could instead cut rates again in December or simply opt to pause again. The ongoing trade war with China could be crucial to Fed decision-making. While a completed deal would likely stymie rate cuts, even a partial deal between China and the U.S. could eliminate one of the most serious risks looming over the U.S. economy.