Federal Reserve interest rate cuts have helped stabilize a stock market weighed down by the trade war, but rising dissension within the US central bank suggests the Dow’s next leg up might need a new catalyst.
Chicago Fed President Disputes Need for Future Interest Rate Cuts
On Wednesday, Chicago Fed President Charles Evans said that although the US economy faces “some risk,” his “own assessment is pretty much in line” with the Fed’s most recent consensus forecast, which called for no additional interest rate cuts in 2019 or 2020.
“I think policy probably is in a good place right now. All told, the growth outlook is good, and we have policy accommodation in place to support rising inflation,” Evans said in a speech in Illinois.
Evans is a voting member of the Federal Open Market Committee (FOMC), which meets in two weeks following two consecutive interest rate cuts.
Three of ten voters dissented from the most recent rate reduction, which occurred in September. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren voted to maintain a neutral interest rate stance.
The other dissenter was James Bullard, who campaigned for a 50 basis point cut. The St. Louis Fed president said this week that he would be comfortable slashing rates all the way to zero (though not into negative territory), alleging that global trade tensions had opened a “Pandora’s box” that could roil markets for years.
October FOMC Meeting Preview
Evans’ speech did little to change the market’s outlook for the October FOMC meeting.
According to CME’s FedWatch tool, fed funds futures imply a 90.3% probability of a 25 basis point rate cut that would bring the central bank’s target range to 1.5% to 1.75%.