Federal Reserve Preview - Fed to Cut by 25 bps and Signal a Pause

We believe that the broadly downbeat US macro data for September was probably enough to convince the majority of FOMC members to deliver another 25 bp cut. Moreover, the Fed has not pushed back against the expectations of the market, which has almost fully priced in this cut, while Vice Chairman Richard Clarida reiterated the phrase that the Fed will "act as appropriate to sustain the expansion." However, the last dot plot showed that the Fed was split on whether to cut rates one more time this year, and no FOMC member expected more than one more cut. Given that the risks of a hard Brexit and trade war escalation have receded, the Fed will likely signal no further easing, which could spur some risk-off sentiment, thus pressuring EM currencies and possibly pushing USD/RUB well above 64.