Rates Spark: One More 25bp Cut, And Then We Wait
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ING Economic and Financial Analysis4.94K FollowersFollow5ShareSavePlay(5min)CommentsSummaryA 25bp cut is practically certain. It's 90% discounted. Not delivering is not really a viable option, given the way the Fed behaves.But expect a hawkish cut, with a pause to be heavily intimated for the January meeting.It will be interesting to see the next Fed liquidity management steps; likely they will need to buy more bills than the MBS roll-off requires. Richard Drury/DigitalVision via Getty Images By Padhraic Garvey, CFA, Regional Head of Research, Americas and Michiel Tukker, Senior European Rates Strategist There is still a containment job to be done in the face of liquidity tightness At the lastThis article was written byING Economic and Financial Analysis4.94K FollowersFollowFrom Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to ING.com/THINK to stay a step ahead. We’re sorry we can’t reply to individuals' comments.Content disclaimer: The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.This publication has been prepared by ING solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. For our full disclaimer please click here.Quick InsightsHow does the Fed's balance sheet freeze impact bank reserves and liquidity?The freeze is intended to stabilize reserves, but persistent tightness suggests the Fed may need to expand reserves by increasing bill purchases beyond MBS roll-off offsets.What are the implications if the Fed cuts rates faster than currently priced in?Accelerated Fed cuts could weaken the dollar, strengthen the euro, and increase disinflation risks in the eurozone, potentially forcing the ECB to consider further easing.How much in monthly bill purchases may the Fed need to maintain reserve growth?To keep pace with 3–5% nominal GDP growth, the Fed may need to buy $20–30bn in bills per month, above MBS roll-off levels.Recommended For You