US Federal Reserve cuts interest rates by 50bps: Powell transitions from "tightening titan to easing evangelist"

Powell's pivot from tightening titan to easing evangelist redefines central bank orthodoxy and could shape monetary policy for years to come. The Fed shocked markets by implementing a 50bps rate cut, which signals a decisive shift in US monetary policy. This bold move comes amidst a clear belief that inflation has been tamed and stabilising economic growth is now the priority. However, the unexpectedly large rate cut will send shockwaves through markets, with the dollar continuing to weaken against major currencies. This is also likely to be the catalyst that gold bugs have been waiting for, with the Fed's decision all but guaranteeing more record-highs on the horizon. With the Fed making a clear statement that it's prioritising growth over inflation concerns, this could be the start of a new bull market in risk assets. As investors digest this seismic shift, it's clear that the era of tight money is over, with the question now being not if rates will fall, but how fast and how far.

The Fed has delivered the jumbo rate cut that until a few days ago had been ruled out. In fact, this was less jumbo and more of an Airbus. Within the next 24 hours we will find out of if the Bank of England follows the Fed and ECB or if we are a month behind. The rate-cutting cycle is well and truly on.

The Federal Reserve's decision to cut its benchmark interest rate by half a percentage point has sent ripples through global markets, but the UK's reaction may be notably muted. Our own unique economic challenges suggest that a celebration may be premature. What happens across the pond should not be celebrated by the UK's borrowers quite yet.

Today’s downright decisiveness from JayPo and the Fed is a sign of two admissions. The first is that the Fed are definitely not willing to be behind the curve on recessionary pressures as they were with inflation, and second that they very much do listen and are influenced by what the markets want to see. This bold and early move makes the rest of Powell's easing cycle a much easier path, and we can expect another 50bps before the end of 2024.

A big boy decision, which sadly won’t be followed by the MPC. Unfortunately baby steps are all we seem capable of taking this side of the pond. There is no decisiveness. The Bank of England needs to put on its big boy pants and for once get ahead of the curve rather than delay further.

The MPC are likely to toe the company line and proceed with too much caution. It’ll probably be a closely run race and I feel the decision to drop the base rate again even with the Fed reducing by 0.5 %, will be split for this month with a cut likely in the coming two months. Core inflation is still likely to keep us at 5% for now.

It is entirely possible that the Bank of England has already agreed to their approach, and that the base rate will stay at 5% for at least another month or so. Something about the British stiff upper lip perhaps, but our economy looks to be in a better position than the US at the moment, and mortgage rates are already making good progress without a huge amount of intervention. There may be increased pressure created on other metrics, such as currency markets given the proportion of US-based companies in our FTSE 100, and the knock-on could twist the arms of the MPC before Christmas for some festive financial cheer.