US | Fed takes “another step in reducing the degree of policy restraint”

Summary

We continue to think that the rate cut cycle still has legs, but following the outcome of the election the Fed will likely end the cycle sooner than previously thought on greater inflationary challenges under Trump’s potential policies.

Key points

• Key points:
• As widely expected, the Fed cut the policy rate by 25 bps and continued to signal that their plan points towards a further gradual reduction of policy restraint.
• The Fed remains confident in the soft landing and rules out risks (for now?) from tighter financial conditions stemming from recently higher long-term Treasury yields.
• As expected, Powell avoided commenting on any issues related to this week's presidential election and the likely effects of Trump’s potential policies.

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