Bill Diviney, the senior economist at ABN AMRO, expects that after the ECB for today’s Governing Council meeting the market focus will quickly shift to the Fed, with the October FOMC meeting due to conclude next Wednesday.

• “We have long expected a 25bp cut at this meeting (see here), and although market pricing has fluctuated considerably in recent weeks, OIS forwards are now 90% priced for a 25bp cut. Given the lack of strong pushback from Fed officials prior to the blackout period, we think it is unlikely the Committee would spring a surprise on markets at this stage, and so an October cut is probably a done deal.
• Could more resilient consumption put further rate cuts on the backburner? – The bigger question mark is over December, with OIS forwards pricing closer to 40% of an additional cut, down from 60-70% earlier in October.
• As a base case, we expect a further 25bp cut at this meeting. However, this view is predicated on weakness in the manufacturing sector feeding through to a slowdown in consumption. While we think the current strength in consumption is unsustainable, the resilience of consumer confidence in the face of slowing jobs growth suggests it may take somewhat longer than we expected for consumption to slow.
• With commentary from Fed officials sounding increasingly reluctant to ease – even more dovish members – this could well mean the December cut is pushed back to January, when a consumption slowdown becomes more visible in the data.”