Barclays_Global_Macro_Thoughts_A_borderline_decision

Restricted - ExternalFOCUS23 September 2024Global Macro ThoughtsA borderline decisionAjay Rajadhyaksha+1 212 412 7669ajay.rajadhyaksha@barclays.comBCI, USMax Kitson +44 (0) 20 3555 2386 max.kitson@barclays.com Barclays, UK Where noted in the source notes, the views expressed within this report are taken from previously published research. For further detail, including important disclosures and analyst certifications, please follow the links on each page and on page 8.This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for its own account and on a discretionary basis on behalf of certain clients. Such trading interests may be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 9.FICC ResearchGlobal MacroRestricted - ExternalCompleted: 23-Sep-24, 11:00 GMT Released: 23-Sep-24, 11:05 GMTRestricted - ExternalThe world at a glance•Happy days are here again for stocks, after the Fed’s 50bp cut•But the 50bp was a borderline decision, with many in the FOMC opposed •No new surprises from the BoJ; the next hike is likely only in December or January•Chinese equities react to renewed hopes of stimulus going into October’s Politburo23 September 20242Restricted - ExternalTouch and go •The Fed cut 50bp, as they seemingly had guided markets to through the news media 1oBut the decision was contentious, with the first formal governor (Bowman) dissent since 2005oMarket pricing also seemed to move to 50 despite stronger data, based entirely on news articles •It was an unusual move; the Fed doesn’t start with 50bp cuts absent a financial crisis or economic tailspin 1oThe US is tracking nearly 3% GDP growth in the Atlanta Fed GDP tracker, after 3% in Q2 as welloThis was also the last meeting before the Nov 5th election, raising the stakes around political perception•The dot-plot showed the extent to which the overall committee was divided 1o9 out of 19 members want just one more 25bp cut for the rest of the year, even if the median is 50oSimilarly, near half the committee wanted a 25bp cut at the September FOMC as well•The SEP has the unemployment rate rising to 4.4% by year-end, which is consistent with a 50bp cut 1oMoreover, 4.4% is the absolute peak for the jobless rate this entire cycle, as per Fed forecasts oSo if U3 actually drops or doesn’t rise in the next 3 months, it argues for cutting less than 50bp in 2024•Chair Powell also insisted that 50bp was not ‘the new pace’, just a ‘recalibration’ to be ‘more neutral’ 1oIt seems very much that the move was a one-time cut, as catchup for not starting the easing cycle in July1 September FOMC: A 50bp re-calibration (19 September 2024)23 September 20243Restricted - ExternalRevisions lower to the FOMC’s dot plotThe median p