Why China isn’t cutting lending rates like the rest of the world

China’s central bank must manage an economy structured in many ways quite differently from that of other major regions, such as Japan or the European Union. But the PBoC faces the same question of how effective monetary policy can be today. The ‘pork problem’Easier monetary policy typically results in higher inflation, which is already on the rise in China due to soaring pork prices. For Dan Wang, China analyst at The Economist Intelligence Unit, the People’s Bank of China needs to balance effor


China’s central bank must manage an economy structured in many ways quite differently from that of other major regions, such as Japan or the European Union.
But the PBoC faces the same question of how effective monetary policy can be today.
The ‘pork problem’Easier monetary policy typically results in higher inflation, which is already on the rise in China due to soaring pork prices.
For Dan Wang, China analyst at The Economist Intelligence Unit, the People’s Bank of China needs to balance effor
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Company: cnbc, Activity: cnbc, Date: 2019-10-23  Authors: evelyn cheng, lilian wu
Keywords: news, cnbc, companies, prices, central, world, isnt, policy, rate, monetary, cutting, pork, interest, bank, china, lending, rates, rest


Why China isn't cutting lending rates like the rest of the world

Pedestrians walk past the People’s Bank of China headquarters in Beijing, China, on January 7, 2019. Giulia Marchi | Bloomberg | Getty Images

BEIJING — The People’s Bank of China is choosing not to follow many other major central banks in cutting interest rates as it tries to navigate a challenging economic environment. China’s central bank must manage an economy structured in many ways quite differently from that of other major regions, such as Japan or the European Union. But the PBoC faces the same question of how effective monetary policy can be today. That has significant implications for the central bank’s signalling, which appeared to take a neutral stance on Monday. “The central bank would not like citizens’ to develop expectations for higher inflation, and so will not likely quickly lower policy rates,‘’ Xu Chenxi, senior analyst of fixed income at Nanhua Futures, said in a Chinese language statement translated by CNBC. “The policy is more concerned with its transmission to the real economy. If the real economy can obtain financing more easily than before, or financing rates decline, then monetary policy is not eager to release an interest rate cut signal.”

On Monday, China’s central bank set its new “loan prime rate” exactly the same for October as September: 4.2% for the one-year rate and 4.85% for the five-year. The rate, known as LPR and set monthly, was announced in August as a way to increase the role of market forces in setting interest rates, while lowering financing costs. “Keeping LPR unchanged in October may reflect a more neutral monetary policy stance. In addition, it is possible that the recent uptrend in CPI has started to become a constraint on monetary policy as well,” China International Capital Corp (CICC) chief economist Hong Liang and analyst Eva Yi said in a report Monday.

The ‘pork problem’

Easier monetary policy typically results in higher inflation, which is already on the rise in China due to soaring pork prices. The country is dealing with a massive shortage in the meat staple caused by an outbreak of African swine fever in Chinese pig farms last year. In September, pork prices leaped 69.3% from a year ago. For Dan Wang, China analyst at The Economist Intelligence Unit, the People’s Bank of China needs to balance efforts to reduce interest rates in the long term without cutting short-term rates too drastically. She noted that while the jump in pork prices sent the consumer price index to a near six-year-high — quite worrisome for anyone just looking at the headline figure — excluding food and energy prices puts CPI at a moderate 1.5%. “China doesn’t have an inflation problem. It has a pork problem,” Wang said. “Keeping monetary policy constrained is a stabilizer for the regional economy and I would give the Chinese government credit for that.”


Company: cnbc, Activity: cnbc, Date: 2019-10-23  Authors: evelyn cheng, lilian wu
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US lawmaker introduces bill cutting nicotine in e-cigarettes amid teen vaping epidemic

Rep. Raja Krishnamoorthi, D-Ill., is introducing a bill that would cap the amount of nicotine in e-cigarettes as lawmakers seek to stem epidemic use among underaged teens. The Ending Nicotine Dependence from Electronic Nicotine Delivery Systems Act would limit e-cigarettes to no more than 20 milligrams per milliliter of nicotine, about a third of the 59 milligrams per milliliter contained in standard Juul pods. It would allow the Food and Drug Administration to lower the cap even more to make e-


Rep. Raja Krishnamoorthi, D-Ill., is introducing a bill that would cap the amount of nicotine in e-cigarettes as lawmakers seek to stem epidemic use among underaged teens. The Ending Nicotine Dependence from Electronic Nicotine Delivery Systems Act would limit e-cigarettes to no more than 20 milligrams per milliliter of nicotine, about a third of the 59 milligrams per milliliter contained in standard Juul pods. It would allow the Food and Drug Administration to lower the cap even more to make e-
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US lawmaker introduces bill cutting nicotine in e-cigarettes amid teen vaping epidemic

US Representative Raja Krishnamoorthi, Democrat of Illinois, looks as Acting Director of National Intelligence Joseph Maguire arrives to testify before a hearing of the House Permanent Select Committee on Intelligence on September 26, 2019, in Washington, DC.

Rep. Raja Krishnamoorthi, D-Ill., is introducing a bill that would cap the amount of nicotine in e-cigarettes as lawmakers seek to stem epidemic use among underaged teens.

The Ending Nicotine Dependence from Electronic Nicotine Delivery Systems Act would limit e-cigarettes to no more than 20 milligrams per milliliter of nicotine, about a third of the 59 milligrams per milliliter contained in standard Juul pods. It would allow the Food and Drug Administration to lower the cap even more to make e-cigarettes minimally addictive or not addictive at all.

While other countries around the world regulate the amount of nicotine in e-cigarettes, the U.S. does not currently have any restrictions. Supporters say the punch that market leader Juul packs helps smokers transition from traditional cigarettes. Critics say it merely makes Juul incredibly addictive, especially for teenagers.

More than one quarter of U.S. high school seniors use e-cigarettes, according to this year’s federal National Youth Tobacco Survey. Krishnamoorthi and the House Committee on Oversight and Reform’s Economic and Consumer Policy subcommittee are investigating market leader Juul’s possible role in fueling what regulators have declared an “epidemic” of teen vaping.

Juul did not immediately respond to a request for comment.


Company: cnbc, Activity: cnbc, Date: 2019-10-07  Authors: angelica lavito, in angelicalavito
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Dallas Fed’s Kaplan says he’d like to avoid cutting rates again in September, but has ‘open mind’

Dallas Fed President Robert Kaplan would like to avoid additional stimulus but is keeping an “open mind.” Kaplan said the Fed’s GDP forecast of 2% growth this year has risks to the “downside.” Holding up is the consumer economy, the biggest part of the economy. Kaplan also addressed concerns about the inverted yield curve. Earlier on Thursday, Kansas City Fed President Esther George said the July rate cut “wasn’t required ” and Philadelphia Fed President Patrick Harker said he doesn’t see the ca


Dallas Fed President Robert Kaplan would like to avoid additional stimulus but is keeping an “open mind.” Kaplan said the Fed’s GDP forecast of 2% growth this year has risks to the “downside.” Holding up is the consumer economy, the biggest part of the economy. Kaplan also addressed concerns about the inverted yield curve. Earlier on Thursday, Kansas City Fed President Esther George said the July rate cut “wasn’t required ” and Philadelphia Fed President Patrick Harker said he doesn’t see the ca
Dallas Fed’s Kaplan says he’d like to avoid cutting rates again in September, but has ‘open mind’ Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-22  Authors: maggie fitzgerald
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Dallas Fed's Kaplan says he'd like to avoid cutting rates again in September, but has 'open mind'

Dallas Fed President Robert Kaplan would like to avoid additional stimulus but is keeping an “open mind.”

“I’d like to avoid having to take further action but I think I’m going to have an open mind about taking action over the next number of months if we need to,” Kaplan told CNBC’s Steve Liesman on Thursday from the Federal Reserve’s economic policy symposium in Jackson Hole, Wyoming.

Kaplan said the Fed’s GDP forecast of 2% growth this year has risks to the “downside.”

“Even though the consumer is very strong and a key underpinning to the economy, manufacturing sector is weak and probably weakening and global growth decelerating is probably finding its way to seep into the U.S. economy,” said Kaplan.

U.S. manufacturer growth slowed to the lowest level in almost 10 years in August, according to data released Thursday. The U.S. manufacturing PMI (purchasing managers’ index) was 49.9 in August, down from 50.4 in July and below the neutral 50.0 threshold for the first time since September 2009, according to IHS Markit.

Holding up is the consumer economy, the biggest part of the economy. In the second-quarter, personal consumption expenditures rose 4.3%, the best performance in six quarters.

“As long as the consumer stays strong we are going to have solid growth,” said Kaplan.

Kaplan also addressed concerns about the inverted yield curve. He said he is less “obsessed” with the little movements in the curves “back and forth.”

“I’m more focused on the fact that the whole curve has moved down over the last three and a half months and the fed funds rate at two to two and a quarter is now above every rate along the curve which to me is a bit of a reality check that says it’s possible our monetary policy stays a little tighter than I would have thought three or four months ago,” he said.

Earlier on Thursday, Kansas City Fed President Esther George said the July rate cut “wasn’t required ” and Philadelphia Fed President Patrick Harker said he doesn’t see the case for additional stimulus.

Following their comments, the bond market’s main yield curve inverted briefly for the third time in less than two weeks on concern that maybe the Fed wouldn’t do enough to save the economy from a recession.

Kaplan is a nonvoting member this year of the Fed’s Open Market Committee.


Company: cnbc, Activity: cnbc, Date: 2019-08-22  Authors: maggie fitzgerald
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Recession signal could put more pressure on the Fed to keep cutting rates

Despite the jolt to markets, the Fed for now is still expected to take a more gradual approach to rate cuts. The yield curve inversion was not being viewed as an automatic recession indicator, despite its strong predictive power in the past. One of those factors, which Fed officials have cited at various times when discussing the flatness of the yield curve, is term premia. “The yield curve has been making it abundantly clear that short-term rates are too high,” U.S. Bank’s Merz said. That, comb


Despite the jolt to markets, the Fed for now is still expected to take a more gradual approach to rate cuts. The yield curve inversion was not being viewed as an automatic recession indicator, despite its strong predictive power in the past. One of those factors, which Fed officials have cited at various times when discussing the flatness of the yield curve, is term premia. “The yield curve has been making it abundantly clear that short-term rates are too high,” U.S. Bank’s Merz said. That, comb
Recession signal could put more pressure on the Fed to keep cutting rates Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-14  Authors: jeff cox
Keywords: news, cnbc, companies, curve, inversion, signal, cutting, yield, rate, point, pressure, fed, market, negative, markets, recession, rates


Recession signal could put more pressure on the Fed to keep cutting rates

The Fed already had been expected to cut its own funds rate by a quarter percentage point. But with economic signals getting increasingly negative, questions are bound to arise over whether the central bank will act even more aggressively.

The spread between yields on the 2- and 10-year Treasurys flipped Wednesday morning as the shorter-duration debt rose above the level of the benchmark rate. That’s a classic recession indicator, predicting the past seven periods of negative U.S. growth.

A red-flashing recession indicator in the bond market only adds to the pressure the Federal Reserve will face when it meets next month to deliver what markets anticipate will be another rate cut.

Fears that a global slowdown could eventually send the U.S. into recession have fueled market turbulence, with major averages all dropping more than 2% Wednesday amid the bond market tumult. The inversion actually had reversed heading into afternoon trading, but it was still enough to trigger fears on Wall Street following a raft of negative economic data out of Europe.

A 25 basis point move “is still our base case,” said Bill Merz, head of fixed income research at U.S. Bank Wealth Management. “But the odds of a more aggressive cut are increasing the longer we are in this period of extreme volatility, uncertainty, negative sentiment and inverted curves.”

Despite the jolt to markets, the Fed for now is still expected to take a more gradual approach to rate cuts.

Market pricing Wednesday pointed to just a 19% chance of a 50 basis point cut at the September Federal Open Market Committee meeting, according to the CME. Traders are anticipating another reduction in October followed by an additional move late this year or early in 2020.

The yield curve inversion was not being viewed as an automatic recession indicator, despite its strong predictive power in the past. Market experts view this inversion as at least partially fueled by some elements that have not been present in previous cases.

“At a minimum, this is a yellow flag,” said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management. “There are aspects of what’s going on that gives us a little more pause about how negative a signal this is, mostly due to technical factors.”

One of those factors, which Fed officials have cited at various times when discussing the flatness of the yield curve, is term premia.

That’s the compensation investors demand for holding assets like bonds. The term premium for the 10-year note has fallen to minus 1.22, according to a New York Fed estimate that is the lowest on record. In other words, investors are demanding a very low premium, putting further downward pressure on yields.

“I think they would want to get the curve not to be inverted,” Draho said. “If things get worse over the next few weeks in terms of economic data, in terms of trade tensions, it’s possible they could go 50 basis points in an effort to try to get ahead of it. Right now, I think they gradually move in that direction.”

To be sure, markets are far from sanguine about the inversion and what it will mean to a Fed divided between those who favor a more cautious approach that leaves policymakers with more ammunition in case of a steeper downturn against those who want to get out in front of potential problems ahead.

Market voices have been clamoring for lower rates, just nine months after the most recent hike as concerns mount over where things are heading.

David Rosenberg, chief economist and strategist at Gluskin Sheff, warned clients in a note Wednesday against “folks [who] will continue to dream up ways to tell you to dismiss the message from the flat shape of the yield curve when instead it is them that you should dismiss.”

Should that message persist, it’s likely to get the Fed’s attention.

“The yield curve has been making it abundantly clear that short-term rates are too high,” U.S. Bank’s Merz said. “We’re seeing a lot of uncertainty and negative sentiment in the market. That, combined with the signal the curve has been sending for some time, could certainly influence the Fed to be more aggressive in their approach.”


Company: cnbc, Activity: cnbc, Date: 2019-08-14  Authors: jeff cox
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Fed’s rate cutting helps provide cover for Trump to wage the trade war

“After [Wednesday’s] FOMC meeting there is little doubt increased trade uncertainties imply more/faster rate cuts,” Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, said in a note to clients. “In fact [Thursday’] trade uncertainties more than offset the hawkish tilt at yesterday’s FOMC meeting in terms of Fed expectations.” Mikkelsen said that not only the Fed but also the European Central Bank will be there to support the economy as the trade war cranks up. “An escalating tra


“After [Wednesday’s] FOMC meeting there is little doubt increased trade uncertainties imply more/faster rate cuts,” Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, said in a note to clients. “In fact [Thursday’] trade uncertainties more than offset the hawkish tilt at yesterday’s FOMC meeting in terms of Fed expectations.” Mikkelsen said that not only the Fed but also the European Central Bank will be there to support the economy as the trade war cranks up. “An escalating tra
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Fed's rate cutting helps provide cover for Trump to wage the trade war

President Donald Trump’s move to intensify the trade dispute with China comes with an important backstop: a Federal Reserve that looks ready to support any economic weakness with interest rate cuts.

Evidence came Thursday of the market’s belief that the central bank will move into action if Trump follows through on his threat to slap tariffs on all Chinese goods entering the U.S.

Futures traders, who had been pricing in a coin-flip’s chance of a rate cut at the Fed’s September meeting, accelerated their bets after Trump’s afternoon tariff tweet. The market now is implying a 94% chance of a cut that comes after this week’s rate reduction that was the first in 11 years, according to the CME.

“After [Wednesday’s] FOMC meeting there is little doubt increased trade uncertainties imply more/faster rate cuts,” Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, said in a note to clients. “In fact [Thursday’] trade uncertainties more than offset the hawkish tilt at yesterday’s FOMC meeting in terms of Fed expectations.”

The market was disappointed after the Fed decision after Chairman Jerome Powell said the cut was not likely to be part of a longer loosening cycle. Traders took the tone as hawkish, and markets sold off sharply.

Stocks bounced back Thursday and were on their way to solid gains until Trump announced his intentions to levy another round of tariffs against China.

Mikkelsen said that not only the Fed but also the European Central Bank will be there to support the economy as the trade war cranks up. Fed officials have cited the trade tensions as a headwind for growth.

“An escalating trade dispute between the US and China also increases the likelihood of a response from the ECB exceeding the rate cut widely expected at its [September] meeting,” Mikkelsen wrote.

Markets anticipate the ECB to cut rates and possibly do more asset purchases as the euro zone economy continues to slow.


Company: cnbc, Activity: cnbc, Date: 2019-08-02  Authors: jeff cox
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Fed disappoints markets by sounding more ‘neutral’ than dovish

When the Fed, as expected, cut interest rates by a quarter point, it disappointed markets because it did not tip its hand on future rate reductions. ET Fed statement. Two Fed officials, Kansas City Fed President Esther George and Boston Fed President Eric Rosengren dissented, as expected, but the dissents themselves create a lack of clarity about future policy. That program involved the rolldown of securities on the Fed’s balance sheet, which the Fed will now replace as they mature. The Fed has


When the Fed, as expected, cut interest rates by a quarter point, it disappointed markets because it did not tip its hand on future rate reductions. ET Fed statement. Two Fed officials, Kansas City Fed President Esther George and Boston Fed President Eric Rosengren dissented, as expected, but the dissents themselves create a lack of clarity about future policy. That program involved the rolldown of securities on the Fed’s balance sheet, which the Fed will now replace as they mature. The Fed has
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Company: cnbc, Activity: cnbc, Date: 2019-07-31  Authors: patti domm
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Fed disappoints markets by sounding more 'neutral' than dovish

When the Fed, as expected, cut interest rates by a quarter point, it disappointed markets because it did not tip its hand on future rate reductions.

Bond yields fluctuated, but were off lows of the session, which were hit right before the 2 p.m. ET Fed statement. Yields rose and backtracked, and stocks fell. The 2-year yield was at 1.83% and the Dow was down about 50 points just before Fed Chairman Jerome Powell began speaking at 2:30 p.m. ET.

“Reading the statement, they’re basically just leaving it open. It’s a cut and we’re going to play it by ear. We’re not precommitting to any future move,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “We gave the market what you wanted. We’re going to play it by ear. The first paragraph on growth on the economy and inflation was basically identical to June when they did not cut.”

Two Fed officials, Kansas City Fed President Esther George and Boston Fed President Eric Rosengren dissented, as expected, but the dissents themselves create a lack of clarity about future policy.

“They threw in one statement on … global developments … and we got two dissents as expected,” said Boockvar.

The Fed also ended its quantitative tightening program two months early, as expected. That program involved the rolldown of securities on the Fed’s balance sheet, which the Fed will now replace as they mature.

“We have to see Powell’s press conference for the tone and nuance around their outlook. It’s a little more neutral than I would say dovish. They ended the balance sheet early and there were two dissenters,” said John Briggs, head of strategy at NatWest.

The Fed revised its statement to include that it was cutting rates because of “the implications of global developments for the economic outlook as well as muted inflation pressures”

Strategists said the Fed was facing the difficult task of explaining why it was cutting interest rates at a time when U.S. data appears to be improving. The Fed has been citing soft inflation and concerns about global growth and trade war uncertainties.

Economists have been expecting the Fed to signal more cutting. “If you get 25 [basis point cut] today, it probably means another one is going to follow,” said Jefferies chief financial economist Ward McCarthy just before the statement was released at 2 p.m.


Company: cnbc, Activity: cnbc, Date: 2019-07-31  Authors: patti domm
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Fitbit craters after cutting guidance

The Fitbit Ionic has a few apps, with more to comeShares of Fitbit cratered as much as 21% after hours on Wednesday after the company cut guidance for the next quarter in its second quarter earnings report. For its third quarter, Fitbit projected revenue to fall between $335 and 355 million, a decline of 10% to 15% year over year. Fitbit said it is cutting its non-GAAP operating expense target to about $640 million, below the $660 million to $690 million previously projected. Despite the light g


The Fitbit Ionic has a few apps, with more to comeShares of Fitbit cratered as much as 21% after hours on Wednesday after the company cut guidance for the next quarter in its second quarter earnings report. For its third quarter, Fitbit projected revenue to fall between $335 and 355 million, a decline of 10% to 15% year over year. Fitbit said it is cutting its non-GAAP operating expense target to about $640 million, below the $660 million to $690 million previously projected. Despite the light g
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Fitbit craters after cutting guidance

The Fitbit Ionic has a few apps, with more to come

Shares of Fitbit cratered as much as 21% after hours on Wednesday after the company cut guidance for the next quarter in its second quarter earnings report. The stock rebounded slightly but was still down more than 11%, which is set to shave more than $100 million from its market cap, which would bring it around $1 billion.

“With weaker Versa Lite sales, we are lowering the midpoint of our 2019 revenue guidance by $95 million to $1.455 billion from $1.550 billion and now expect full year 2019 revenue to be $1.43 billion to $1.48 billion,” the company said in its earnings release.

For its third quarter, Fitbit projected revenue to fall between $335 and 355 million, a decline of 10% to 15% year over year. The company said it expects the average selling price of devices will drop each year while the number of devices sold increases.

Fitbit said it is cutting its non-GAAP operating expense target to about $640 million, below the $660 million to $690 million previously projected.

For the full fiscal year, Fitbit now expects a loss of 31 to 38 cents per share compared to a 15 cent loss analysts were expecting, according to Refinitiv.

Despite the light guidance, Fitbit beat analyst estimates for the second quarter on the top and bottoms lines. Fitbit reported an adjusted loss of 14 cents per share on $314 million in revenue. Analysts had anticipated a loss of 18 cents per share on $312 million in revenue, according to Refinitiv.

Just a day before Fitbit’s report, Apple said its revenue for wearables, home and accessories sales came in at $5.53 billion in its most recent quarter. While the segment is made up of AirPods and smart speakers in addition to smart watches, the figure proves Fitbit faces stiff competition in the wearable activity tracker space.

Subscribe to CNBC on YouTube.

Watch: Fitbit CEO James Park: Innovation and an affordable price point can drive growth


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Now the market thinks the Fed could make an even deeper cut to rates later this month

Traders increased their bets on Thursday that the Fed could cut even deeper later this month. “This is a Fed that is data independent.They are not cutting interest rates because of incoming data. They are cutting interest rates because they worry about the future data and they are being pre-emptive,” she said. Now, the Fed has to follow through with a rate cut after its strong signals in order to maintain its credibility. Swonk said some investors believe Powell is responding to Trump by getting


Traders increased their bets on Thursday that the Fed could cut even deeper later this month. “This is a Fed that is data independent.They are not cutting interest rates because of incoming data. They are cutting interest rates because they worry about the future data and they are being pre-emptive,” she said. Now, the Fed has to follow through with a rate cut after its strong signals in order to maintain its credibility. Swonk said some investors believe Powell is responding to Trump by getting
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Now the market thinks the Fed could make an even deeper cut to rates later this month

Like Ben Bernanke and Janet Yellen before him, Federal Reserve Chairman Jerome Powell may be worried that the central bank’s use of extreme policy during the financial crisis left him with a relatively small amount of fire power to head off the next economic decline.

That may make the idea of a so-called insurance rate cut later this month, an attractive option for the Fed chair, who looks determined to cut interest rates even as the domestic economy appears to be showing some signs of strength.

“It’s pretty incredible how strong the data has been. We added 224,000 jobs. We had an extraordinarily strong retail sales report; a 0.3% gain in core CPI month over month. Manufacturing surveys are rebounding. Jobless claims are hovering at cycle lows,” said Michelle Meyer, Bank of America head of U.S. economics. “The set of data heading into the next FOMC meeting is really quite robust.”

Yet, Meyer, like many Wall Street economists, expects Powell’s Fed on July 31 to pull the trigger on a quarter point rate cut, the first since 2008, and possibly the first of several. Traders increased their bets on Thursday that the Fed could cut even deeper later this month.

“This is a Fed that is data independent.They are not cutting interest rates because of incoming data. They are cutting interest rates because they worry about the future data and they are being pre-emptive,” she said. She said the strategy of using some of the few rate hikes the Fed has available to boost the economy, and keep it from rolling over is a gamble.

The Federal Reserve has increased interest rates nine times since it took the fed funds rate range to zero in the face of a looming depression in 2008. The Fed started raising interest rates again in December, 2015 and with quarter point increments, it had taken the fed funds rate range up to 2.25 to 2.50% by December, 2018.

New York Fed President John Williams Thursday added credence to market expectations the Fed will cut rates this month when he said he sees a need for the Fed to vaccinate the economy against risk when rates are low, and that the close proximity of zero rates has changed the way central banks react.

“When you have only so much stimulus at our disposal, it pays to act quickly to lower rates at the first sign of economic distress,” Williams said in a speech. His comments sent interest rates lower, the dollar lower and stocks higher.

“All the incremental data has been positive…what’s interesting is Williams is saying because of the proximity to the zero lower bound and the chance that monetary policy is constrained, they have to be more aggressive. If you only have so much space they have to really take advantage of that opportunity,” said BMO rate strategist Jon Hill.

The futures market is pricing in 100% odds of a quarter-point cut at the Fed’s next meeting and two more this year. Hill said the market priced in even higher odds that the Fed would make a 50 basis point cut in July, following Williams’ comment.

Specifically, the odds of a half-percentage-point cut by the Fed increased to 59% on Thursday following the Williams talk, up from about 35% earlier in the day, according to the CME’s Fedwatch tool.

Joseph LaVorgna, Natixis chief economist Americas, said Williams comments make it seem as though the Fed would be willing to cut by a half percentage point at its July meeting.

“In a weird way the strong data is going to make them go more. The strong data gives them an out. They can cut 50 [basis points] in July. At that point, they can go back to being data dependent. By going back to being data dependent, they actually buy themselves more optionality. They can go back to watching data and they can get more easing into the system,” said LaVorgna. “It’s a way to get future easing out into the market and to do it in a way that’s not destabilizing.”

All over the globe, central bankers are flexing policy, cutting rates and promising more easing as the Fed prepares to move. Indonesia and Korea bankers made surprise rate cuts Thursday morning, the latest in a series of central bank moves, and both the Bank of Japan and European Central Bank have been holding out the possibility of more easy policy.

“The reason they’re not willing to let the economy flirt with recession is because they feel they have limited policy space right now,” said Meyer.

Powell has laid out his reasons for a possible cut, and they did not so much include U.S. economic weakness, as much as he pointed to low inflation, a weak global economy and the unknown impact of trade wars.

“I think the reason the [U.S.] data looks so decent is because the Fed is going to cut. If the Fed had not pirouetted and pivoted, we would not have seen the improvement,” said Diane Swonk, chief economist at Grant Thornton. Now, the Fed has to follow through with a rate cut after its strong signals in order to maintain its credibility.

Powell’s Fed is pivoting, and this time pivoting away from a stricter interpretation of the central bank’s mandate than some of his predecessors. He has assigned the Fed the task of prolonging the economic recovery, commenting a number of times that the Fed “will act as appropriate to sustain the expansion.”

“To put that explicitly in the statement, it’s the Fed’s goal to sustain the expansion. I think they came to the realization that they have more slack in the economy than they realized and they’re pulling people in from the sidelines…It means a 3.7% unemployment rate today doesn’t mean what it meant in the past, ” she said.

The Fed is also fighting a global slowdown because it knows the impact will be felt in the U.S. Williams also noted that foreign central banks, specifically the ECB and Bank of Japan, with their negative yields, have less space to react to trouble, while the U.S. has the space to react to “run of the mill” negative shock.

Meyer expects the Fed to follow through with multiple cuts, but she said if the data holds up, the Fed may find a way to end the rate cutting cycle. But economists say the trade issues are perhaps the thorniest and one the Fed can’t easily combat.

“You’ve got decelerating growth. You’ve got warnings from abroad, and in both September of 1998 and September of 2007, the Fed said let’s cut rates a little bit and we’ll think of them as insurance cuts,” said Luke Tilley, chief economist at Wilmington Trust. In 2007, the economy was heading into the Great Recession and that plan did not work, but it did in 1998.

While the consumer-related data has been showing improvement, much of the U.S. manufacturing data has been weak, along with the rest of the world.

“If the problem with the economy is tariffs, and they keep going up, the Fed does not have the right medicine at their disposal,” said Tilley.

“What we really need to see is an improvement in the U.S. and Chinese trade relationship. If we really went to a bad place, I don’t think there’s much the Fed could do to fix the economy if we get more tariffs on more Chinese goods,” said Tilley..

Swonk said the downside of cutting interest rates for the Fed now is that it could be fueling a bubble in financial markets.

“The other danger of cutting is it looking like they’re being bullied by the White House. That is something they take seriously. It’s why a minority of presidents would rather skip this meeting and make a stand to show they would not capitulate to the president,” said Swonk. Swonk said some investors believe Powell is responding to Trump by getting set to cut interest rates in a good economy, but she does not believe that.


Company: cnbc, Activity: cnbc, Date: 2019-07-18  Authors: patti domm
Keywords: news, cnbc, companies, data, fed, month, economy, thinks, cut, interest, later, rate, central, rates, deeper, williams, market, cutting


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Here’s who benefits from the Fed cutting interest rates

3 Hours AgoTo view this site, you need to have JavaScript enabled in your browser, and either the Flash Plugin or an HTML5-Video enabled browser. Download the latest Flash player and try again. Sallie Krawcheck, Co-founder and CEO of Ellevest says the rate cuts can be good for some but bad for others.


3 Hours AgoTo view this site, you need to have JavaScript enabled in your browser, and either the Flash Plugin or an HTML5-Video enabled browser. Download the latest Flash player and try again. Sallie Krawcheck, Co-founder and CEO of Ellevest says the rate cuts can be good for some but bad for others.
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Company: cnbc, Activity: cnbc, Date: 2019-07-10
Keywords: news, cnbc, companies, site, browser, benefits, plugin, cutting, heres, rates, flash, interest, try, rate, enabled, need, player, fed, view


Here's who benefits from the Fed cutting interest rates

3 Hours Ago

To view this site, you need to have JavaScript enabled in your browser, and either the Flash Plugin or an HTML5-Video enabled browser. Download the latest Flash player and try again.

Sallie Krawcheck, Co-founder and CEO of Ellevest says the rate cuts can be good for some but bad for others.


Company: cnbc, Activity: cnbc, Date: 2019-07-10
Keywords: news, cnbc, companies, site, browser, benefits, plugin, cutting, heres, rates, flash, interest, try, rate, enabled, need, player, fed, view


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With online banks cutting interest rates, should you get a CD?

But that could be ending soon: With the Federal Reserve expected to cut interest rates, big online players, including Ally and Marcus by Goldman Sachs, are lowering their rates. The top online accounts are still offering 2.4% or more, well above the national average of 0.10%. Personal finance site NerdWallet has a CD rate tool that can help consumers compare interest rates and the fees applied to early withdrawals. NerdWallet reports that the best CD rates to be had are also at online institutio


But that could be ending soon: With the Federal Reserve expected to cut interest rates, big online players, including Ally and Marcus by Goldman Sachs, are lowering their rates. The top online accounts are still offering 2.4% or more, well above the national average of 0.10%. Personal finance site NerdWallet has a CD rate tool that can help consumers compare interest rates and the fees applied to early withdrawals. NerdWallet reports that the best CD rates to be had are also at online institutio
With online banks cutting interest rates, should you get a CD? Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-07-08  Authors: alicia adamczyk
Keywords: news, cnbc, companies, rates, cd, online, accounts, rate, cutting, mcbride, savings, months, apy, banks, interest


With online banks cutting interest rates, should you get a CD?

Online banks have been steadily raising the annual percentage yield (APY) on their savings accounts to well over 2% in an effort to gain more customers. But that could be ending soon: With the Federal Reserve expected to cut interest rates, big online players, including Ally and Marcus by Goldman Sachs, are lowering their rates. The dip is no need to panic, Greg McBride, chief financial analyst for Bankrate.com, tells CNBC Make It. The top online accounts are still offering 2.4% or more, well above the national average of 0.10%. “It’s still a good environment for savers,” says McBride. “The fact is, we’ve seen lots of competition in recent months where the rates went up.” Still, the small drop in interest rates likely isn’t worth going through the hassle of switching accounts from Ally or Marcus to a bank offering a higher APY. The rates on these savings accounts are variable, after all, and may go back up or potentially drop further.

You can lock in an APY with a CD, but you might not want to

For savers who want to avoid variable APYs, a certificate of deposit (CD) is another option. CDs lock in an interest rate that’s typically higher than the average savings account — the average APY on one-year CDs is currently 0.64% — with a few catches. For one, money deposited into a CD isn’t as easily accessible as it is in a savings account: It’s kept in the CD for a pre-determined period of time — say, three months, six months, a year or more — until it’s “matured.” And if it’s withdrawn early, a penalty is applied, usually equivalent to a few months interest. “Basically, a certificate of deposit offers a yield and has no risk,” Janet Alvarez, analyst at WalletHub, tells CNBC Make It. They are “a popular instrument among those who want to get a little extra on their cash and are willing to keep their money blocked until maturity.” If there’s a chance that you might need to use the money in your CD, compare options and choose one with the lowest penalties. Personal finance site NerdWallet has a CD rate tool that can help consumers compare interest rates and the fees applied to early withdrawals. The CDs that offer the highest APYs typically have higher minimum deposit requirements than, say, an Ally savings account, and they require longer periods of maturity. NerdWallet reports that the best CD rates to be had are also at online institutions and credit unions. As of writing, Discover offers a 5-year CD with a minimum balance of $2,500 and a APY of 2.85%, but you’ll pay 18 months worth of interest if you need to withdraw funds early. CD yields are also likely to fall ahead of a rate cut, McBride says. Banks don’t want to be locked in to paying out a higher rate than they have to for longer than they have to. And according to McBride, savers typically wouldn’t be able to find an interest rate that’s meaningfully more than what online savings accounts offer unless they opt for a four- or five-year CD. Otherwise, rates are comparable to online savings accounts, which are far more flexible. “The appeal in CDs is still pretty limited,” says McBride. “What’s the point?”

Online accounts are ideal for emergency savings


Company: cnbc, Activity: cnbc, Date: 2019-07-08  Authors: alicia adamczyk
Keywords: news, cnbc, companies, rates, cd, online, accounts, rate, cutting, mcbride, savings, months, apy, banks, interest


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