FED Remain Cautious Over Next Move

USD

An increasingly divided Federal Reserve decided to hit pause in its easing cycle following a rate cut at its October meeting offered little guidance on what would cause policymakers to change their minds on the outlook, minutes of the central bank’s last policy meeting showed.

The readout released on Wednesday of the Oct. 29-30 policy discussion, at which the Fed voted 8-2 to lower interest rates by a quarter percentage point, also showed policymakers further discussed the possibility of setting up a standing repo facility in the wake of recent ructions in short-term money markets.

Following the meeting, Fed Chair Jerome Powell signaled the Fed was effectively on hold with interest rates and said that would only change if there was a “material” change in the U.S. economic outlook.That phrasing, absent from the policy statement at the time, indicated that October’s reduction in borrowing costs to a target range of between 1.50% and 1.75%, would be the last rate move over the short term.

In the minutes, there was little discussion of what a “material” reassessment would involve, bar two policymakers who wanted the Fed to make plain that another rate cut would be unlikely in the near term unless there was a significant slowdown in the pace of economic growth. Dallas Fed President Robert Kaplan has since said the price of his support was such a statement being made.

The Fed has one more interest-rate setting meeting before the end of the year, on Dec.10-11, but investors now see the Fed keeping interest rates unchanged until at least mid-2020.

GBP

British Prime Minister Boris Johnson said on Wednesday he planned a multi-billion-pound tax cut if he wins an election on Dec. 12, by raising the amount of earnings exempt from social security payments.

Workers currently pay social security payments — known in Britain as National Insurance contributions (NICs) — on annual earnings over £8,632, lower than the 12,000-pound threshold at which income tax becomes payable.
The Institute for Fiscal Studies, an independent think-tank, said the initial cut in the threshold would cost the government around 2 billion pounds in the next financial year.

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