Fed pivots from inflation to growth
by AIB Treasury Economic Research Unit
- The move by the US Fed to initiate its rate cutting cycle with a bumper 50bps cut came as somewhat of a surprise, with the focus now turning to how the Fed will proceed from here, and what impact the move will have on other central banks.
- Notably, there also continues to be a relatively wide dispersion of views among FOMC members on the future path for rates.
- The key takeaway from the week’s events is that the Fed has decisively shifted its focus away from its inflation mandate towards the labour market and GDP growth.
- The Fed pivot also raises questions for the other major central banks. In particular, UK rates have usually moved in lock-step with US rates in prior cycles.
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