Synopsis:

MUFG anticipates the Fed will proceed with a 25bps rate cut at today’s FOMC meeting, maintaining a cautious approach following Trump’s election win. While the Fed is not expected to adjust policy based on the election outcome immediately, they will closely monitor economic developments, particularly any post-election boost in business sentiment. The likelihood of a December rate cut remains, though it’s not certain.

Key Points:

• November Rate Cut: MUFG expects a 25bps cut, supported by recent strong US data, with minimal immediate impact from the election outcome on policy decisions.
• Post-Election Sentiment: The Fed will monitor whether Trump’s win and reduced political uncertainty boost business confidence, potentially strengthening the US economy in 2024.
• December Cut and 2024 Caution: While a December cut is still likely, the Fed may signal caution for 2024 if Trump pursues higher tariffs, which could affect economic stability and the rate outlook.

Conclusion:

MUFG expects a steady 25bps cut at today’s FOMC, with the Fed maintaining a cautious stance amid election-related uncertainties. A potential boost in economic sentiment may affect future policy, though the Fed is likely to remain careful with additional cuts, especially if trade policies shift.