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.
