US Federal Reserve pauses... until the next crisis

The minutes of the US Federal Reserve's 29th and 30th October meeting, released yesterday evening, show that the currency guardians continue to view the risks to the economic outlook as high. Against this backdrop, a rate cut would have been appropriate, even though the decision to do so was a close one.

However, most FOMC members were of the opinion that the monetary policy orientation was now appropriate following the recent interest rate move. This makes further rate cuts unlikely for the time being. For the interest rate cuts to continue, the economic outlook would have to deteriorate noticeably again. The risks associated with the still smouldering trade conflict with China are high and can quickly become a significant economic risk.

There are different interpretations of the state of negotiations between the USA and China. It should be noted, however, that both sides should welcome a positive development. On the Chinese side, good news would be a welcome distraction from the Hong Kong conflict. And US President Trump would certainly have nothing against a positive development in the current impeachment hearing. In the end, the compromise will probably be rather meagre, but there will be many beautiful pictures that both parties can use.

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