Government Lending

Is another rate cut on the way for 2019?

Weak economic data points to yes

Federal Reserve officials appear open-minded about additional interest rate cuts this year, and weak economic data could increase those chances.

Futures traders say there’s a nearly 80% chance of a 25 basis point rate hike at the October Federal Open Markets Committee meeting, according to the CME FedWatch tool.

Back in September, the Federal Reserve cut its benchmark rate by a quarter of a percentage point in a bid to keep trade wars and the threat of a global recession – what it delicately called “global developments” – from tanking America’s decade-long expansion.

It was the Fed’s second quarter-point cut in two months as the central banker tried to provide some help to the economy while keeping a buffer they could use if needed to counteract more severe financial trouble.

And minutes from the Fed’s July FOMC meeting showed that more rate cuts are likely through the end of 2020.

And now an article by Jeanna Smialek for The New York Times explained that data increasingly suggests that a slowdown is on the way.

From the article:

Data increasingly suggest that a slowdown is, in fact, materializing. Both of the Institute for Supply Management’s closely watched surveys, one that tracks manufacturing and another that monitors services, posted declines for September, reports this week showed. Consumer confidence has shown signs of weakening, and while spending is still growing, it has slowed from a robust pace earlier this year.

Federal funds futures are predicting a 79.6% chance of a 25 basis point hike in October to a target range of 1.5% to 1.75%, while another 20.4% predict the Federal Reserve will hold rates at their current target of 1.75% to 2%.

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