Having foreshadowed a willingness to renew monetary accommodation as early as January of this year,
perhaps the Fed could be lauded for holding off action until the third quarter against the withering
criticism from the President and intermittently volatile markets. But capitulate it finally did, not once
but twice, with an ease of 25 basis points in September to follow one in late July, which had marked its
first cut since 2008. What was notable in the redirection of policy, as highlighted by the latest meeting
minutes, was a lack of consensus versus the past, underscoring uncertainty (and dispersion of opinion)
among the FOMC members. The broader viewpoints suggest increased risk of policy error, particularly
in the face of unrelenting political pressure. However, it wasn’t as if the more dovish faction was
without support for its perspective: since the start of the year, trade tension and its fallout disaffected
economic measurables in a meaningful way. As a result, global recessionary concerns mounted in the
third quarter, particularly in Europe where the IHS Market Eurozone composite PMI, which captures
both manufacturing and services activity, fell to 50.4 in September, the lowest reading since June
2013, and German manufacturing PMI fell to a 10-year low. Trade concerns have taken a toll on U.S.
manufacturing as well, with the PMI here falling into contraction territory for the first time in three years.
Not surprisingly, businesses remain skeptical of the prospective environment, as evidenced by sharp
declines in survey-based measures of expectations, confidence, and spending decisions...
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