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The US central bank lowered its benchmark lending rate by 25 basis points to a range of 1.75-2% at its meeting on Wednesday “in light of the implications of global developments for the economic outlook”. It is the second such cut since late July.
While the move was widely expected, the Federal Reserve was divided in its decision with three central bank officials dissenting – two against the cut and another asking for a 50-basis-point cut – the most since Jerome Powell became chairman.
The record number of dissents under Powell has raised questions about the uniformity of the central bank’s outlook for further rate adjustments this year.
“In his opening address at the press conference, chair Powell remained positive on the economic outlook and argued that [Wednesday’s] rate cut was to provide ‘insurance’ against the risks. When asked if this was still a mid-cycle policy adjustment, he agreed but offered that if the economy weakens then a more extensive series of rate cuts could be appropriate,” Rodrigo Catril, currency strategist at National Australia Bank, said on Thursday.
While Powell did not rule out further rate cuts, his remarks were not as dovish as markets had expected, which boosted the dollar.
The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down little changed from its previous close at 98.55 as at 10.32am Shanghai time. But this is up from a reading of 98.28 at a similar time on Wednesday.
The firmer US currency acted as a broad headwind for the base metals.
Giving the worst performance of the SHFE base metals complex this morning, the most-traded November zinc contract fell to 19,010 yuan ($2,682) per tonne as at 10.37am Shanghai time, down by 115 yuan per tonne – or 0.6% – from Wednesday’s close of 19,125 yuan per tonne.
“Zinc suffered the biggest falls after data showed a pick-up in supply,” analysts with ANZ Research said in a morning note.
China’s output of refined zinc rose by 18.9% year on year to 528,000 tonnes in August, the highest since December 2017, according to China’s National Bureau of Statistics. Output totaled 4.03 million tonnes in January-August, an increase of 8.2% from the same period of 2018.
Elsewhere, nickel was the most resilient of the SHFE base metals this morning, with a marginal decline of 140 yuan per tonne – or 0.1% – in the metal’s most-traded November contract to 136,520 yuan per tonne as at 10.37am Shanghai time. Other highlights