Fed Wrap – Fed Cuts in Response to Weakening Jobs Data

Ryan Weldon, from IFM’s Debt Investments team in New York, features in our Fed Wrap market update videos discussing central bank themes in debt markets, with a particular focus on the US Federal Reserve (Fed).

In this edition, Ryan discusses the outcomes of the September Fed meeting, the updated dot plot and summary of economic projections, and how the Fed will look to balance their dual mandate over the coming meetings. 

At the September meeting, the Federal Reserve cut rates by 25bp, lowering the upper band of their policy rate to 4.25%, with one dissenting vote in favor of a 50bp cut. The updates to the statementshow that while the Fed still sees inflation as elevated, they see higher downside risks to employment. Interestingly, the Fed noted that despite the recent slowdown in employment, the unemployment rate is still low. This suggests that they are likely worried that the unemployment rate may deteriorate quicker without any support from monetary policy. The mentions of increasing and elevated inflation show they are still balancing their dual mandate, however, the statement and dot plot indicate that they are willing to respond swiftly to hard employment data rather than potential inflation impacts.