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The SA Daily 10 April 2019

FOMC March minutes & ECB

Shireen Darmalingam

  • The Fed 20 March Federal Open Market Committee (FOMC) meeting minutes are due out tonight; the Fed had kept the Fed funds rate unchanged at the meeting, maintaining a dovish tone, and flagging no rate hikes for 2019. Fed Chair Powell has said that inflation being too low was “one of the major challenges of our time”.
  • The March minutes will likely be dovish, and with no hikes foreseen this year. The probability of a rate cut has now risen though, with markets factoring in an even chance of a cut by year-end. President Trump has for a while been calling for a cut. We expect the bank to keep the Fed funds rate unchanged in 2019. Political pressure will put the spotlight on the Fed’s decision at the next meeting as the bank would want to maintain its independence.
  • Fears of a US recession have been rising, supporting the case for a rate cut. However, recently better-than-expected non-farm payrolls data supports the idea that the US economy is improving, if only marginally. The March minutes will likely indicate steady rates as respectable economic growth seems on the cards.
  • The European Central Bank’s (ECB) monetary policy committee will meet today, and expectations are for a dovish tone. Interest rates are largely expected to remain steady.

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