Posted at 9:47 PM
Rate cut senario
A rate cut of less than 100 basis points is likely to be greeted with lots of negative sentiment and would be negative for carry-trades and Equity markets. A 100 basis points rate cut on the Fed Funds rate to 2.0% (if seen) would take it below the Fed's preferred inflation indicator...Namely Core PCE price index which was last reported at 2.2%. This means that the Real interest rates would turn negative for the first time since 2003. A negative real rate scenario is generally very negative for $-Yen. The discount rate, which was cut on Sunday, is again likely to cut, in the same magnitude to the Fed Funds rate.
Rate cut senario
A rate cut of less than 100 basis points is likely to be greeted with lots of negative sentiment and would be negative for carry-trades and Equity markets. A 100 basis points rate cut on the Fed Funds rate to 2.0% (if seen) would take it below the Fed's preferred inflation indicator...Namely Core PCE price index which was last reported at 2.2%. This means that the Real interest rates would turn negative for the first time since 2003. A negative real rate scenario is generally very negative for $-Yen. The discount rate, which was cut on Sunday, is again likely to cut, in the same magnitude to the Fed Funds rate.