They 'why' might be important than the what
The main reason that any central bank lowers rates domestic economic weakness. What makes a cut today so unusual is that economic weakness isn't really a factor. Sure, there are pockets of softness like manufacturing and business investment but the overall picture is solid-at-worst.
So the Fed needs to find a reason to cut.
There are two main schools of thought that Fed members have expressed: 1) weakness abroad 2) inflation softness.
On both fronts they have a solid leg to stand on. European and Chinese growth are slowing, emerging markets aren't doing much better. There isn't a recession imminent anywhere but the picture is poor, some of which is due to Trump's trade war.
Inflation is a bit more interesting. Core PCE was 1.6% y/y in yesterday's report but has shown some shorter-term momentum. The Fed is worried about missing its inflation target for years and that's probably something that should have been addressed yesterday, but better late than never.
Reading the statement and watching the press conference, the key will be how these factors flow through and continue. That will be a clue on what's coming next. The key number for me is that a second cut in September is 76% priced in for Sept and 87% priced in for October. If anything sounds like a one-and-done, that's going to mean a big USD rally. Even a wait-and-see approach cuts down those odds and puts us in data-watching mode.
