Fed cuts rates, but draws line under further loosening

The Fed cut interest rates for a third time as expected today, to between 1.5% and 1.75%, but changes in the statement suggest it is trying to dissuade the markets from pricing in any further loosening. Nevertheless, we still anticipate that a further deterioration in the incoming activity data will persuade the Fed to change tack and cut interest rates one final time in December. In particular we expect fourth-quarter GDP growth to slow to only 1.0% annualised and expect average monthly payroll gains to fall below 100,000.