Will the Fed give the market what it wants?

The futures market is already pricing in a US interest rate cut, but will the Fed meet its expectations? asks Jeremy Batstone.

In 1998 the US Federal Reserve cut base rates by an initial 0.25% in the immediate aftermath of Long Term Capital Management's collapse, only to discover that a sanguine market had anticipated more, so the Fed acted again shortly afterwards. Who is to say that we might not get a dose of the same medicine this time around?

Although wary of drawing too many parallels with nine years ago we do find ourselves wondering whether, in the wake of Ben Bernanke's speech at Jackson Hole on 31st August, the Fed will give the market (judging by the Futures pricing of US Fed Funds rate expectations) what it wants. A 25 basis point cut has already been fully discounted ahead of the forthcoming Open Markets Committee meeting thus such a decision might end up making little difference.

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