Divided they cut
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Why did the Federal Reserve implement a third 25‑basis‑point rate cut this year?
Well, the Fed cut a bit of a divided Fed, but it could have been worse. But was it hawkish? As expected? Well, they expect the economy to grow. They expect unemployment to come down, inflation to ease. What's the rush to cut? Plus the Bank of Canada overnight. And Australian unemployment numbers today as well. It's Thursday, it's the eleventh of December, twenty twenty five. It's the morning call from NAB. Good morning. Well the US dollar has fallen back today, losing naught point three percent on the DXY before the Fed. No change to the Aussie still around sixty six point four US cents. The yen down naught point four percent. US stocks uh m moved a little ahead of the Fed, down a quarter percent though for the Nasdaq.
Uh we gained a little after the Fed, flat for the S and P, but then it was up naught point one percent after the Fed. So not massive moves, and it's the same with Treasuries. So ten year Treasuries Down four basis points at four point one five percent. Most of that before the Fed.
How did the US dollar, equity markets and Treasury yields react after the Fed announcement?
They were easing into it. Aussie 10 years up five basis points yesterday to 4.81%. Now a couple of basis points lower than that. And oil marginally down. Silver is up another 0.6%. It hit a new high at 62.14 on comics in this session. And here's Sally Old from NAB in Sydney. So yeah, let's address the elephant in the room, first of all. Uh a hawkish cut was expected from the Fed. They have lowered rates by twenty five basis points, very divided, only three dissenters, and only one cut expected next year.
Yeah, good morning, Phil. Yes, that's a that's a pretty neat summary. Uh I think broadly, you know, the Fed meeting this morning has delivered largely in line with expectations. So as you said, they've cut uh the the funds rate by twenty five basis points. That was largely expected. And then we did have the three dissents, um, you know, which is quite a lot. We haven't seen that really, I think, for about five or six years. Uh and both ends of the spectrum. So Moran dissented in favor of a
What does the Fed’s latest statement and dot‑plot reveal about future rate‑cut expectations?
50 basis point rate cut, and then we had a couple of the regional Fed Governors, Goolsby and Schmidt, who dissented in favour of unchanged rates at the December meeting. So, you know, really spanning the the entire spectrum. And and the language in the statement uh you know was adjusted marginally, but I guess does um bias the outcome slightly less dovishly in the sense that we've got this phrase in In there uh, you know, about considering the extent and timing of additional adjustments and and that I think has been taken by the market as just signalling that um, you know, this period maybe of risk management where the Fed was just sort of saying, Look, we are a little bit worried about downside risk to the labor market.
We we think we should be protecting those. Uh and so it makes sense just to get um a reasonable calibration of policy underway and they've cut now three times. They're probably, you know, closer to something that they think is is more neutral in terms of its overall impact on the economy. And so therefore, you know, from here it's really going to depend on and on what the data do. And like you said, in terms of the dots, you know, when we look at the median expectation, it's just for one more cut in twenty six and one more cut in twenty seven, albeit there is a a fair bit of variation in those forecasts across the committee. Well I mean
It was sort of flagged that this was going to be a hawkish meeting, uh, you know, because uh growth is picking up, unemployment is down, um they're expecting inflation is gonna move down as well, you know, the big question did they actually need to do anything at all and do they need to do more cuts? Could we find that okay, it's it's it's in the in the dots, but could this be the last one?
Yeah, it's interesting because, you know, that's exactly right. When we look at the actual forecasts um, you know, for twenty twenty six, uh, you know, what we basically see is from here on in unemployment rate, the expectation or the median expectation is that it gradually declines uh from this year into next and into twenty seven and that actually there's been you know reasonably decent uplifting growth uh for twenty six.
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Chapters
8 chapters
1
Why did the Federal Reserve implement a third 25‑basis‑point rate cut this year?
0:01–0:56
2
How did the US dollar, equity markets and Treasury yields react after the Fed announcement?
0:56–1:54
3
What does the Fed’s latest statement and dot‑plot reveal about future rate‑cut expectations?
1:54–4:27
4
Why did the Bank of Canada keep its policy rate unchanged overnight?
4:27–6:17
5
Are European central banks revising growth forecasts upward after recent data releases?
6:17–8:15
6
What are the latest CPI and PPI trends in China and what do they imply for inflation?
8:15–10:33
7
How might Australia’s November employment numbers influence the RBA’s policy outlook?
10:33–13:23
8
What is the current state of US and Canadian trade data and its impact on the outlook?
13:23–14:58