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Fed pivots instead of pushing back at the recent shift in market expectations and fuels bets of rate cuts in early 2024; Treasury yields plummet along the yield curve

Fed opens up toolkit to support flow of credit

April’s FOMC statement, released today, confirms that the Federal Reserve (Fed) will continue with its aggressive strategy to deal with the economic fallout and downside risks.

FOMC Statement: March 3rd

In an unscheduled and abbreviated statement, the Fed announced an emergency 50bp cut to 1-1.25% in the Fed Funds rate, similar to the response to 9/11.

FOMC Meeting: December 10th-11th

As we expected, the Fed lefts its benchmark interest rate by unchanged at 1.5-1.75% and made only minor adjustments to the October statement.

FOMC Meeting: October 29th-30th

For the third time this year, the Fed lowered the target range of federal funds rate 25bp to 1.5-1.75% without significant changes to their outlook on the labor market or inflation.

U.S. Repo Market Tracker. October 25, 2019

Repo Rates: Rates stabilize as average daily intervention inches up to $84bn during the week. Fed recalibrates intervention: daily up to $120bn from $75bn and term up to $45bn from $35bn.

U.S. Repo Market Tracker. October 18, 2019

Repo Rates: Rates trended higher but pressures receded after increased intervention. Fed Open Market Operations: Average daily intervention jumped to $81bn during the week; Repo operations will continue at least through January.

U.S. Repo Market Tracker. October 11, 2019

Repo Market: No major spikes in rates. Average daily intervention since 9/17 jumps to $65bn; Fed commits to overnight repo operations at least through January 2020; Several FOMC members suggest introducing standing repo facility.

U.S. Repo Market Tracker. October 4, 2019

Repo Rates: Rates continue to stabilize. Fed Open Market Operations: Average daily intervention softened to $47bn this week from $86bn prior. Fed Balance Sheet: Total assets up $185bn since 8/28; Reserves up $101bn since start of turmoil.

FOMC Meeting: September 17th-18th

As we expected, the Fed lowered its benchmark interest rate by 25bp to 1.75-2.0%.

FOMC Meeting: June 18th-19th

After weeks of disappointing data, rising trade tensions and renewed fears of slower global growth, the Fed set the stage for a monetary easing cycle, in line with our view.

FOMC with stoic response to market uncertainty

As expected, at their March 19th-20th meeting, the Fed left rates unchanged and maintained their patient bias. This is not surprising considering the weak incoming data, the downward bias to the committee’s outlook and increasing downside risks abroad.

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