Analysts at BlackRock are wary of Wednesday’s move from the Federal Open Market Committee (FOMC), describing the extent of the rate cut as unexpected.
They say that while the 50bp cut might benefit the markets in the short term, they believe it also increases the likelihood of more volatility, especially if growth and inflation don’t align with the Fed’s soft landing forecasts.
Balckrock argue that the outlook is highly uncertain, and with opinions split prior to the Fed’s blackout period, the near-consensus in Tuesday’s decision is arguably more surprising than the single dissent.
They warn that with Fed Chair Powell described the policy decision as a “recalibration,” its a term he may refer to later if rate cuts are paused and it becomes evident this isn’t a full easing cycle.
The analysts anticipate that the market’s rate cut expectations will likely be unmet, and any positive developments will come from strong growth instead.
AI image