Fed preview Cap Economics via BBG

By Vivien Lou Chen
(Bloomberg) — The Federal Reserve risks disappointing
markets next week just as the European Central Bank did on
Thursday, even after President Mario Draghi set the stage for
another round of monetary stimulus in September, said Paul
Ashworth of Capital Economics in Toronto.
* For more, see: All Talk, No Action From Draghi Frustrates
European Stock Bulls; and For Traders, Draghi Wasn’t Dovish
Enough
* Any disappointment to a 25bp Fed rate cut in bond and stock
markets would be particularly acute if one or more hawkish
policy makers dissents, Ashworth wrote in a note
** Stocks and Treasuries could sell off, yields may rise on the
day
** Hard to say specifically how the response would look since
“not all 25bp rate cuts are the same,” he said in a phone
interview
** For example, Fed may offer no indication of additional rate
cuts to come, or could make further easing contingent on the
data; market’s response also will depend on how many policy
makers dissent
* Fed may face criticism days after its rate decision if the
data show further weakness; Capital Economics expects ISM
manufacturing index to slip to a three-year low of 51.5 on
Thursday and nonfarm payrolls to rise by a muted 145k


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