FOMC Update 9-18-19: Another Interest Rate Cut and Heightened Attention to the Repo Market

Noting global weakness, muted inflation and the impact of trade policy on the economy, the Federal Open Market Committee today cut rates by 25 basis points. The move was widely expected but there was some additional news in the official announcement and press conference that followed, as you’ll hear in our FOMC update with Charles Carmody, CFA, Vice President, Co-Portfolio Manager and Sr. Fixed Income Trader, and Christian Brobst, Vice President, Associate Portfolio Manager.

Carmody and Brobst touch on:
  • Fed Chairman Jerome Powell’s studied avoidance of the term “mid-cycle” adjustment.
  • The Fed’s response to a funding crunch this week in the repo market that banks use to exchange high-quality assets (e.g., Treasuries) for cash. While the Fed announced a 30-basis point reduction in the rate it pays on bank reserves, the FOMC Update discusses possible remedies. The liquidity problem is not going away and can be expected to recur at monthly and quarter-end periods, Carmody says.
  • The Fed’s de-emphasis of the meaning of dot plots, the method it uses to convey its benchmark interest rate outlook, with the dots representing each member’s view of where interest rates should be at the end of each year. The intention is to be more data-dependent.
  • Organic balance sheet growth, which Carmody and Brobst had expected more detail on.

The markets’—bond, stock and currency—immediate reaction to the meeting outcome was muted.

TRANSCRIPT

Advisors, for information about Calamos’ perspectives or funds, contact your Calamos Investment Consultant at 888-571-2567 or caminfo@calamos.com.

Update recorded 9/18/19.

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Archived material may contain dated performance, risk and other information. Current performance may be lower or higher than the performance quoted in the archived material. For the most recent month-end fund performance information visit www.calamos.com. Archived material may contain dated opinions and estimates based on our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions at the time of publishing. We believed the information provided here was reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Fund’s maximum front-end sales load. Had it been included, the Fund’s return would have been lower.

Archived material may contain dated performance, risk and other information. Current performance may be lower or higher than the performance quoted in the archived material. For the most recent month-end fund performance information visit www.calamos.com. Archived material may contain dated opinions and estimates based on our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions at the time of publishing. We believed the information provided here was reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Fund’s maximum front-end sales load. Had it been included, the Fund’s return would have been lower.

Archived on September 17, 2020