September 2019 Economic Recap
The main headline from this month was the turmoil in repo markets. On Tuesday September 17th a confluence of factors, including but not limited to corporate tax payments and elevated issuance of Treasuries, resulted in a severe liquidity shock. Those seeking funds to shore up balance sheets and overnight positions found a shortage of lenders, sending rates skyrocketing from the low 2% range to upwards of 9%. In response to these developments the Fed opened up an overnight and term repo facility, and later announced that it would resume expansion of its balance sheet with the goal of replenishing bank reserve balances.
The Fed also announced a rate cut at its mid-September meeting, citing weaker global growth, low inflation, and a weaker domestic outlook due to the ongoing trade war. Market expectations are that the Fed may cut rates for a third time at this month’s meeting, and twice more in the first half of next year.
For a deeper consideration of the economic data released during September, please follow the links below: