Analysts at Deutsche Bank note that the overwhelming consensus (and DB) expectation is for another 25bp rate cut from the U.S. Fed this week, following the 25bp cut at the July meeting, which was the first rate-cut since 2008.

• “The main focus will be on where they go after this week. Our economists think a continued dovish bias should be evident in the statement language, Summary of Economic Projections and Chair Powell’s press conference. It seems Powell is still keen to emphasize the baseline as a mid-cycle slowdown though over anything more sinister but it’s hard to imagine him not highlighting the risks, especially around trade.
• Expect the “act as appropriate to sustain the expansion” line to continue to be the takeaway. A reminder that after this 25bps cut our economists expect a further cumulative 75bps of rate cuts (Oct, Dec, Jan) after next week’s reduction.
• With all the positive data releases from the US last week, which also included lower-than-expected weekly jobless claims and higher-than-expected consumer borrowing figures, investors reassessed the chances of aggressive easing from the Federal Reserve over the coming months. By the end of last week, investors saw the chances of at least 75bps of further cuts from the Fed this year at 17.6%, down from 40.6% at the end of the previous week. Meanwhile, the chances of just one further 25bp cut this year rose over the last week from 13.7% to 33.3%.”