19/09/2024 Daily Reports
Following the Federal Reserve’s rate cut, attention shifts to the Bank of England (BoE), which is expected to keep interest rates unchanged at 5.0% on Thursday. With Britain’s services inflation still high at 5.6%, policymakers are likely to maintain a cautious stance, avoiding easing too quickly. The focus may shift to the BoE’s plans for reducing its pandemic-inflated balance sheet, with expectations of another 100 billion pound reduction in gilts over the next year, which could benefit the bond market.
Meanwhile, global markets responded positively to the Fed’s cut, with European stock futures rising and a surge in the dollar against the yen. In Asia, Chinese stocks and bonds also gained, driven by expectations of further economic stimulus from Beijing as the Fed’s move clears the way for additional policy support to boost China’s struggling economy.
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Oil was steady as investors weighed signs of weak US demand against a steep interest-rate cut from the Federal Reserve and escalating tensions in the Middle East.
Brent futures traded near $74 a barrel and West Texas Intermediate was close to $71. US gasoline demand dropped further below 9 million barrels and jet fuel consumption ebbed for the third straight week, according Energy Information Administration data released Wednesday.
The global benchmark has fallen by around 15% this quarter on concerns over China’s economic slowdown and plentiful global supply. The Fed cut its policy rate by 50 basis points on Wednesday, but Chair Jerome Powell cautioned that no one should see this as a “new pace.”
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With inflation barely above their target level, Fed officials have been shifting their focus toward supporting a weakening job market and achieving a rare ‘soft landing,’ whereby it curbs inflation without causing a sharp recession. A half-point rate cut would signal that the Fed is as determined to sustain healthy economic growth as it is to conquer high inflation. This week’s move is expected to be only the first in a series of Fed rate cuts that will extend into 2025.
