Fed starts at a sprint, but the finish line is uncertain
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The US Federal Reserve initiated a 50 basis point rate cut on September 20, 2024, a larger move than expected, signaling urgency in its monetary policy. Chief Economist Luci Ellis notes that this approach may risk market volatility, as not all FOMC members agreed, with Michelle Bowman dissenting. The Fed's actions are characterized as a 'sprint first, then dawdle' strategy, reflecting uncertainty about the neutral rate, which is likely higher than pre-pandemic levels. The Fed's median member expects only a further 50 basis points cut over the next two meetings. Global factors, including geopolitical tensions and demographic shifts, are pushing interest rates higher, with neutral rates projected to be in the low to mid 3% range, contrary to the Fed's estimates. Ellis emphasizes that the RBA's decisions remain independent of the Fed's actions, expecting no rate changes in Australia for the rest of the year.

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https://www.westpaciq.com.au/economics/2024/09/lucis-friday-note-20-september-20243