Bank Deals Blog: Fed / Banking News

Signs still point to a Fed that will be on the sidelines for the rest of this year and through next year. These signs first came from the October Fed meeting and the post-meeting press conference when the Fed signaled that further rate cuts in the near term are unlikely as long as the economic data doesn’t deteriorate. Unfortunately for savers, the Fed Chair Jerome Powell signaled that the bar for the Fed returning to rate hikes is high. In the press conference, the Fed Chair said:

The new fintech, HMBradley, has launched a website describing a new digital banking platform that offers a deposit account with a 3% APY. As is typical with new fintech companies, there’s only a waitlist. Also, there are many details to qualify for the 3% APY. Just like last December when Robinhood received media attention for an announced 3% bank account, HMBradley has started to receive media attention. This Money.com article was published yesterday.

The unique thing about HMBradley’s proposed deposit account is the Savings Tiers which are based on how...

The Fed cut rates for the third time last week. The good news for savers is that the Fed signaled that further rate cuts in the near term are unlikely as long as the economic data doesn’t deteriorate. So these rate cuts may have been just a mid-cycle adjustment and not the start of a long rate cutting cycle. If that is the case, we may not see many more deposit rate cuts.

Unfortunately, an end of rate cuts doesn’t mean the start of rate hikes. Fed Chair Jerome Powell suggested...

The Fed’s two-day meeting started today. The meeting announcement is scheduled for 2:00 PM EDT Wednesday. Following the announcement, a press briefing by Fed Chair Jerome Powell will take place. The odds appear very high that the Fed will cut rates again by 25 bps. The Fed may provide a few signals on Wednesday that suggest an end of the rate cutting is near. We’ll know if those signals were sent if the stock market tanks on Wednesday. A big drop in the stock market means that stock market investors...

Based on the market’s expectations, the odds of a Fed rate cut at next week’s FOMC meeting (Oct 29-30), are very high. However, based on what Fed officials have been saying in recent speeches, a rate cut may not be such a sure thing.

One example was an October 16th speech by Chicago Federal Reserve President Charles Evans (a 2019 FOMC voting member). In that speech, he suggested that he still agreed with the Fed’s median outlook from the September meeting:

As Evans stated, the September median outlook saw no additional rate...

The recent progress on the trade talks has slightly reduced the odds that the Fed will cut rates again at its October 29-30 meeting. However, the Fed may determine that one more rate cut would be wise based on the risks to the economy that have grown since their last meeting.

The minutes of the last Fed meeting were released last Wednesday, and they showed that the Fed’s concern about the economy has grown since their July meeting:

The effects of the trade tensions and global developments have been impacting business investment,...

After the September 18-19 Fed meeting, it appeared that there was a good chance of the Fed holding rates steady at its October 29-30 meeting. Unfortunately, those odds have been diminishing.

The September unemployment report that was released last Friday did offer some good news, especially the news that the U.S. unemployment rate dropped to 3.50% last month, a 50-year low. As economist Tim Duy described in his Bloomberg op-ed:

The economic news before the unemployment report added to the economic worries as explained in this Reuters article on the jobs report:

The September ISM manufacturing report that was released today was weaker than expected. This news adds more pressure on the Fed for another rate cut at its next meeting on October 29-30.

On the positive side, last week’s economic news on housing data reduced recession fears. Economist Tim Duy had this to say in his Fed Watch blog post regarding last week’s report:

The next big economic data point for the Fed will be this Friday when the Labor Department releases the September employment report. If the jobs number disappoints, the odds...

Last week the Fed did another rate cut. The target range for the federal funds rate was lowered 25 bps to 1.75%-2.00%. After two consecutive Fed meetings, we are now down 50 bps from the recent peak of the target range for the federal funds rate. If this pace of rate cuts continue, we’ll be back at the zero bound by July 2020.

Based on last week’s Fed meeting, we should not be headed back to zero rates any time soon. In the post-meeting press conference, Fed Chair Jerome Powell said...

The Fed’s two-day meeting started today. The meeting announcement is scheduled for 2:00 PM EDT Wednesday. Along with the announcement, the Fed will be releasing its quarterly Summary of Economic Projections (SEP), which includes the “dot plot” that shows FOMC participants’ expectations of the future federal funds target rate. Following these releases, a press briefing by Fed Chair Jerome Powell will take place. The odds still show a 25 bp rate cut is the most likely outcome, but the odds of the Fed holding rates steady have been rising.