Well today was the day many of us were waiting for, its further confirmation that US economic conditions aren’t looking good. Don’t worry, will give you everything you need to know in this quick release! Be sure to check out our list of hidden recession indicators.
The FED cut rates by quarter point (25bps) today at FOMC press conference…
According to the Fed’s “dot plot” of individual expectations, five members thought the FOMC should have held its previous range of 2% to 2.25%, five approved of the 25 basis point cut but keeping rates there through the rest of the year, and seven favored at least one more cut this year.
Summary of what Powell said
- FED cut rates by 25bps
- We will continue to use the tools we have (would’ve hated to play a drinking game where you take shot every time Powell said this as it had to be over a dozen times he said this exact thing)
- FED economists do research all the time and its generally of very high quality (ugh ok)
- May resume organic balance sheet growth earlier than thought
- Will start QE4, just not yet (we beg to differ with recent $150 Billion repo bailout over last 2 days)
- Powell said there is real uncertainty out there and certainly possible will have to raise balance sheets earlier than thought
- Don’t see negative rates if at lower bound
- “Its a challenge time, I admit”
You can watch full broadcast here if you like…
Here is a quick look at hot takes during and after…
During and immediately after news of rate cut, Bonds, Stocks & Gold took a hit, while USD pumped. That’s it for now, stay tuned as we update this as needed!
Bond Market back on track for inversion, now just 2 bps
NY FED Announced 3rd consecutive Repo Bailout on Thursday at 8:15am
Statement Regarding Repurchase OperationFull article here
In accordance with the FOMC Directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 8:15 AM ET to 8:30 AM ET tomorrow, Thursday, September 19, 2019, in order to help maintain the federal funds rate within the target range of 1-3/4 to 2 percent.
This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion. Securities eligible as collateral in the repo include Treasury, agency debt, and agency mortgage-backed securities. Primary Dealers will be permitted to submit up to two propositions per security type. There will be a limit of $10 billion per proposition submitted in this operation. Propositions will be awarded based on their attractiveness relative to a benchmark rate for each collateral type, and are subject to a minimum bid rate of 1.80 percent.
This is pretty concerning coming out of Zerohedge today, they got an email from a FED analyst asking for source to a BOA statement made earlier this month stating that the FED would start QE4 without notice.
For what it’s worth, Bank of America believes “the Fed will need to step in to offset these funding market pressures through outright balance-sheet expansion or QE, potentially in 4Q.” And while the Fed could get ahead of these issues by laying out a framework around money market control before greater criticisms and questions emerge about the independence of monetary/fiscal policies or the path to MMT, it won’t do that, and instead it will wait for another, even greater “Lehman-like” crash to float the idea of imminent QE… which is precisely what Nomura warned about earlier in the day..