To cut or not to cut?

IN a surprise move last week, not only did the US Federal Reserve (Fed) abandoned its previous guidance of potentially two rate hikes for this year but at the same time reduced the pace of reduction of its own balance sheet, starting in May and looking to end the unwinding of it at the end of the third quarter this year.

With that plan in mind, the Fed’s balance sheet will stand still at US$3.5 trillion in six months time from its current level of about US$3.8 trillion as it runs off US$50bil a month over the next two quarters.