The Fed’s decision after the election

The American Federal Reserve (Fed) will hold its next monetary policy meeting in an uncertain electoral climate. The 25bps rate cut seems almost certain.

What to expect

• No surprises with a 25bps rate cut from 4.75-5% to 4.5-4.75%. This drop is almost 100% “priced”, so there will be no surprises for the markets.
• The elections may have delivered their verdict but whether that is the case or not the Fed should remain cautious about the pace of rate cuts in the future.
• Indeed, economic data has shown a resilient economy since the decision to lower rates by 50bps in September.
• The Fed should also emphasize the impact of hurricanes and strikes on the latest employment data (as it did after Katrina or Sandy).
• The press release should not change drastically compared to September except for what concerns hurricanes.

In summary, the Federal Reserve meeting should not have much impact with a rate cut widely anticipated and a market focused on the results of the American elections.