DAVY VIEW

The Federal Reserve yesterday (October 29th) eased the Federal Funds Rate by 25bp, as expected. However, more hawkish commentary from Chair Jay Powell resulted in some mild upward repricing of market expectations for future interest rates. A lack of official data releases is adding to a challenging backdrop for rate setters owing to mildly stagflationary impulses. Record highs for US equity markets are helping to keep financial conditions looser than otherwise. However, this could change suddenly and if that took place, faster rate cuts would be a likely policy response.