- The US Federal Reserve has cut the Fed Funds rate by 0.25% citing uncertainties around the outlook for growth and inflation. The key uncertainties relate to trade and weaker global growth along with ongoing low inflation.
- We expect another one or two 0.25% cuts with the next in September but with US recession unlikely this rate cutting cycle is likely to be limited. Fed and global monetary easing generally should help boost global growth into next year.
- Beyond potential short-term volatility, falling US rates are positive for shares on a 6 to 12 month view.
- The main risks are the threats posed by US trade wars and tensions with Iran.
- The RBA was already on track to cut rates to 0.5% in our view and the Fed’s move does nothing to change that.