PMIs suggest economy may be stabilising

The Fed will probably cut interest rates for third consecutive time at the conclusion of its two-day policy meeting Wednesday. That will come shortly after GDP figures for the third quarter are released, which we expect to show growth was a muted 1.5% annualised. The Markit PMIs for October, reported this week, are consistent with growth slowing a little further in the fourth quarter, but also suggest that the downturn may be close to bottoming out. In that scenario, we expect the Fed to follow up next week’s cut with one final 25bp reduction at the December meeting, before moving to the side-lines in 2020, as economic growth begins to rebound.