The Federal Reserve sent shivers through markets with their latest interest rate decision. The Fed decided to cut rates, but recognised the growing inflation problem, in the US economy. The Fed iterated that it was a close call to cut rates by 25 basis points, and projected rate cuts in 2025, would be reduced from four to two. The recognition of a looming inflationary crises was palpable, which sent markets into a tailspin. Bond yields moved sharply higher, as did the US Dollar, while the equity markets crashed. The Central Bank market focus continued overnight, with both the Bank of England and the Bank of Japan leaving rates unchanged and citing surging inflation, as the key driver. The surge in the US Dollar plunged the EUR back to 1.0350, while the GBP crashed to 1.2560.The sharp rise in the reserve hit already compromised commodity currencies hard, with the AUD crashing to 0.6260, while the NZD plummeted to 0.5610. Commodity currencies have been under the hammer with extremely weak domestic economic and trade numbers, suffering global trade woes, while commodity prices suffering accordingly. The bad news continued for the NZ economy, following the Governments shockingly weak half-year fiscal update, with GDP data confirming a deep recession. NZ GDP growth contracted 1% for Q3, following the Q2 contraction of 1.1%, confirming a deep technical recession. The numbers confirm the pain many feel. Local markets will focus on the PBoC IRD today.
