The key moment in the global monetary policy cycle finally arrived in September, the US Federal Reserve (Fed) delivering its first interest rate cut of this cycle, the only surprise element being its size at 50bps. Other major central banks, including the European Central Bank (ECB) and Bank of England, had already cut rates, but the pre-eminence of the dollar as the world’s reserve currency, and the huge amount of dollar debt issued offshore, totalling over $13tn, means it is the Fed which underpins policy globally and constrains the flexibility of other central banks. Although a cut was widely anticipated by investors, this is a pivotal moment and a boost to asset values – some of which had been discounted in markets ahead of the event, but nevertheless providing a strong tailwind, especially as the Fed is guiding a series of cuts over the next 18 months.
