Powell’s Audible: We Think We’re There, Time To Pause

PGIM Fixed Income

October 2019

Ellen Gaske, PhD, CFA, Lead Economist G10 Economies, Global Macroeconomic Research Team, and Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds

The Federal Reserve followed through with its third 25 bps cut to the Fed funds rate this year and struck a somewhat less-dovish tilt than at its prior meeting, perhaps suggesting a shift to wait-and-see mode.

Our base case assumes that the Fed will pause for the foreseeable future as the impact of its rate cuts this year continues to filter through the economy and the FOMC takes time to assess developments across the global economy.

While current valuations for U.S. rates may represent “fair value” against just the U.S. domestic economic picture, when set against a world of ultra-low and negative rates, we see them as biased to fall.

 

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