In this file:
· Fed approves quarter-point rate cut but is divided on further action this year
· Hong Kong follows US Fed’s 25 basis point rate cut, just in time for city’s stalling economy and kickoff of Budweiser’s mega IPO
Fed approves quarter-point rate cut but is divided on further action this year
o The central bank announces it’s taking down its benchmark overnight lending rate to a target range of 1.75% to 2%.
o According to the Fed’s “dot plot” of individual expectations, five members thought the FOMC should have held its previous range of 2% to 2.25%, five approved of the 25 basis point cut but keeping rates there through the rest of the year, and seven favored at least one more cut this year.
o The committee again cites “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary rationale for Wednesday’s cut.
Jeff Cox, CNBC
Sep 18, 2019
The Federal Reserve approved a much-anticipated quarter-point interest rate cut Wednesday but offered few indications that further reductions are ahead as members split on what to do next.
Following its two-day policy meeting, the central bank announced that it would take down its benchmark overnight lending rate to a target range of 1.75% to 2%. That comes nearly two months after the policymaking Federal Open Market Committee went ahead with its first cut in 11 years.
Major U.S. stock exchanges dropped after the decision was announced.
In addition to the reduction, the Fed cut the interest it pays on excess reserves by 30 basis points, greater than the funds rate cut, amid a breakdown this week in the overnight repurchase lending market. The move was aimed at keeping the funds rate within its target range; the interest on excessive reserves (IOER) historically has acted as a guardrail for the funds rate, which traded 5 basis points above the target.
While the committee as a whole has not pointed to further cuts, divisions remain among individual policymakers. Three Fed regional presidents — Esther George of Kansas City, Eric Rosengren of Boston and James Bullard of St. Louis — each voted no. George and Rosengren have said they prefer to keep the funds rate steady while Bullard has advocated for a 50 basis point cut.
That was the most dissents for a Fed decision since December 2014.
President Donald Trump, who has called Fed policymakers “boneheads” for not cutting rates enough, tore into Wednesday’s decision, saying Chairman Jay Powell and his colleagues have “no ‘guts.’” Trump says the Fed is risking U.S. competitiveness by keeping rates substantially higher than most of the rest of the developed world.
Divided outlook ...
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Hong Kong follows US Fed’s 25 basis point rate cut, just in time for city’s stalling economy and kickoff of Budweiser’s mega IPO
Hong Kong Monetary Authority cuts base lending rate by 25 basis points to 2.25 per cent
Norman Chan Tak-lam says Monetary Authority and banks will help businesses survive ‘challenging time’
Enoch Yiu, South China Morning Post (China)
19 Sep, 2019
Hong Kong’s monetary authority cut its base lending rate for the second time this year in lockstep with the US Federal Reserve’s widely expected move overnight, reducing the cost of money just as a slowing local economy teeters on the brink of a technical recession.
The city’s de facto central bank reduced the base lending rate by 25 basis points to 2.25 per cent effective immediately, matching a similar cut by the US Fed.
All three note-issuing banks, HSBC, Bank of China Hong Kong and Standard Chartered Bank, as well as Hang Seng Bank kept their prime lending rate unchanged at between 5.125 per cent and 5.375 per cent.
Sammy Po Siu-ming, chief executive of Midland Realty’s residential division, said that even though banks were yet to lower their rates, the interest-rate environment remains benign for the property market that has seen used home prices drop by 1.8 per cent between end-July and September 8.
“The interest rate cut will benefit the capital markets and economic activities in Hong Kong, “ Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, said in a media briefing after the rate cut.
“The global economy is on a downward trend as a result of the trade war between China and the US. The local social unrest has hit hard tourism, retail and restaurant businesses. The HKMA and banks will work together with the government to help (small and medium enterprises) cope with the challenging time,” he said, referring to earlier announced measures to ensure businesses have funds to stay afloat.
Meanwhile, the People’s Bank of China (PBOC) is expected to...