Now that the Federal Reserve cut interest rates for the second time by 25 basis points to a target range of 1.75% to 2.00%, what is next for the United States central bank?
From Wednesday’s statement, the dot-plot suggests that seven Fed officials anticipate one more rate cut this year. And the CME Group FedWatch tool does support this view, which means the key interest rate would be in the range of 1.50% to 1.75% to close out 2019.
President Donald Trump was not happy by the news, tweeting that the Fed has “no guts, no vision!” Does Trump want the Fed to cut rates all the way down to zero overnight? Yeesh!
A day later, the central bank pumped a third dose of liquidity into money markets to the tune of $75 billion – the other two happened on Tuesday with $53.2 billion and on Wednesday with $75 billion.
So, with all this intervention, what’s next?
Well, a fourth round of quantitative easing (QE) is likely the next policy maneuver.
As it has been reported, the Fed purchased $14 billion worth of Treasurys in August and it is expected to purchase another $20 billion in bonds between September 16 and October 11 (SEE: As FOMC meets will Federal Reserve launch QE4?).
While the Eccles Building has not officially announced QE4, all its moves signal that it is next on the table.
Now, what about zero interest rates? That might be in the cards, especially with a president desperate for ZIRPs and many other nations diving into negatives.
Time will tell.
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