The Fed has three options. Here’s the difference between them, and why anything could happen

There’s virtually no chance given to holding steady, though two regional Fed presidents recently have said that’s exactly what the committee should do. If you are, then 50 basis points makes sense. A 50 basis point hike, on the other hand, could signal something more serious, like fears over a more fundamental slowdown in growth. “It gives the Fed more optionality in the sense that the Fed might be able to wrestle market expectations back in more balanced way,” he said. You take out a little bit


There’s virtually no chance given to holding steady, though two regional Fed presidents recently have said that’s exactly what the committee should do. If you are, then 50 basis points makes sense. A 50 basis point hike, on the other hand, could signal something more serious, like fears over a more fundamental slowdown in growth. “It gives the Fed more optionality in the sense that the Fed might be able to wrestle market expectations back in more balanced way,” he said. You take out a little bit
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Company: cnbc, Activity: cnbc, Date: 2019-07-23  Authors: jeff cox
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The Fed has three options. Here's the difference between them, and why anything could happen

The Federal Reserve heads into its meeting next week with three choices, each carrying its own advantages as well as drawbacks. Policymakers either can choose to hold interest rates steady, cut by a quarter or a half point. Raising rates isn’t an option and may well not be for several years. Markets are indicating that they have it figured out: The Federal Open Market Committee most likely will cut by a quarter point, with a small chance of a half-point reduction. There’s virtually no chance given to holding steady, though two regional Fed presidents recently have said that’s exactly what the committee should do.

With the Fed currently pegging its overnight funds rate in a range between 2.25% and 2.5%, here’s the difference between each move, particularly what a 50-basis-point cut would mean as opposed to a 25-point cut:

Quarter point: The most likely case

Judging by statements Fed officials have made in recent days, there’s some support for implementing a more aggressive 50-point easing. But the 25-basis-point move seems more likely simply because the post-financial crisis Fed has been one to favor incrementalism rather than radical policy moves. In short, the lower reduction will be an easier sell. “Although you could certainly build the case for a stronger action, a 50 basis point cut, I just think it’s going to be hard to get everyone on board with that,” said Curt Long, chief economist at the National Association of Federally Insured Credit Unions. “Are we on the edge of a recession? If you are, then 50 basis points makes sense. But I don’t think the majority of the Fed feels that way.” Indeed, the reduction could come down to what kind of message the Fed wants to send. The lower option could simply be a way to undo the damage caused in December when the Fed approved a 25 basis point hike, despite a tumbling stock market and fears over tariffs and a global slowdown. A 50 basis point hike, on the other hand, could signal something more serious, like fears over a more fundamental slowdown in growth. “The Fed made a policy mistake last year,” said Quincy Krosby, chief market strategist at Prudential Financial. “It’s hard to think that they will not come in at 25 basis points at the minimum, because [Chairman Jerome Powell] will have a lot of explaining to do if they don’t.”

Half point: One and done?

Adopting a 50 basis point, or half percentage point, cut would acknowledge something deeper — that not only was the December hike in error but that the Fed feels it needs to correct markets and guard against potentially greater damage to the economy. Going for the half-point move offers a variety of benefits, said Joe LaVorgna, chief economist for the Americas at Natixis. “It gives the Fed more optionality in the sense that the Fed might be able to wrestle market expectations back in more balanced way,” he said. “One way to wrestle them back is to make it a bigger thane expected move in July and then wait, actually be data dependent. You take out a little bit more insurance and kind of wrestle market expectations back. They can be less dovish, they can be more balanced if they move 50.” Markets aggressively priced in the more dramatic cut during a brief move Thursday sparked by a speech from New York Fed President John Williams. The influential official said in a speech that the Fed should act quickly and forcefully when it seems economic headwinds building, comments the market took to mean a 50 basis point cut was coming. But a Fed spokesman quickly walked back the remarks, saying Williams was only speaking theoretically and not in a way that should be interpreted as policy intention. “By going to cut more, hopefully you’re done,” LaVorgna said. “If the economy’s OK and weathers the storm, you’re done, vs. the more drip, drip, drop let’s wait and see and do things on a meeting by meeting basis. Fifty gets you out in front.” He added that the move would help reverse a yield curve inversion that saw short-term yields, specifically in the fed funds rate, move higher than the 10-year Treasury note, in the past a classic recession signal.

Holding the line


Company: cnbc, Activity: cnbc, Date: 2019-07-23  Authors: jeff cox
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Trump wades into debate over controversial Fed speech Thursday, calls for end to tight policy

President Donald Trump weighed into a simmering debate over the Federal Reserve interest rate policy, saying Friday that the central bank needs to end its “crazy” tightening moves. In a series of tweets, the president addressed an unusual controversy stemming from a speech Thursday that New York Fed President John Williams delivered. Market participants initially took Williams’ remarks as indicative that the central bank was prepared to cut rates aggressively, by perhaps a half a percentage poin


President Donald Trump weighed into a simmering debate over the Federal Reserve interest rate policy, saying Friday that the central bank needs to end its “crazy” tightening moves. In a series of tweets, the president addressed an unusual controversy stemming from a speech Thursday that New York Fed President John Williams delivered. Market participants initially took Williams’ remarks as indicative that the central bank was prepared to cut rates aggressively, by perhaps a half a percentage poin
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Trump wades into debate over controversial Fed speech Thursday, calls for end to tight policy

President Donald Trump weighed into a simmering debate over the Federal Reserve interest rate policy, saying Friday that the central bank needs to end its “crazy” tightening moves.

In a series of tweets, the president addressed an unusual controversy stemming from a speech Thursday that New York Fed President John Williams delivered.

Market participants initially took Williams’ remarks as indicative that the central bank was prepared to cut rates aggressively, by perhaps a half a percentage point. But a Fed spokesman soon walked back the comments, causing confusion over where policy is headed.

Trump said he liked Williams’ “first statement much better than his second.” He called on the Fed to “stop with the crazy quantitative tightening” and not to “blow it” by halting “unparalleled” growth.

The president, though, mischaracterized Williams’ comments. Williams never said in the speech that the Fed raised “far too fast & too early,” as Trump suggested. Rather, Williams said the Fed, when confronted with an economic downturn and interest rates close to zero, should cut quickly and aggressively.

Trump has long been a Fed critic, saying the central bank’s rate hikes since December 2015, along with its efforts to reduce bond holdings on its balance sheet, i.e. “quantitative tightening,” have constrained economic growth. The Fed already has announced plans to halt the balance sheet rolloff, likely in September.

With fears building over a bevy of issues including global economic slowdown, tariffs, Brexit, debt ceiling negotiations and a vexing lack of inflationary pressures, markets widely expect the Fed to announce a rate cut at its July 30-31 meeting.

In his speech, Williams said that when faced with “economic distress,” the Fed should “act quickly” and “keep interest rates lower for longer.” Coming along with similarly dovish comments from Fed Vice Chairman Richard Clarida and St. Louis Fed President James Bullard, markets immediately started pricing in an even sharper reduction from the Fed than the typical quarter-point moves and looked for a possible half-point cut.

Williams’ office, however, followed with a statement saying that his comments were only in regard to an academic study and shouldn’t be construed as a current policy intention.

Traders on Friday were assigning a 41% chance of a half-point cut, according to the CME’s FedWatch tracker.


Company: cnbc, Activity: cnbc, Date: 2019-07-19  Authors: jeff cox
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Fed’s Rosengren not on board for rate cut: ‘I think we should wait’

Boston Federal Reserve President Eric Rosengren is lining up against an apparent push to cut interest rates, telling CNBC in an interview Friday that the central bank can afford to be patient as long as the economy holds up. Speaking just 12 days before the Fed is expected to ease monetary policy, Rosengren said he is aware of uncertainties and downside risks but doesn’t think they’re strong enough yet to warrant the first rate reduction since late 2008 during the financial crisis. But I think w


Boston Federal Reserve President Eric Rosengren is lining up against an apparent push to cut interest rates, telling CNBC in an interview Friday that the central bank can afford to be patient as long as the economy holds up. Speaking just 12 days before the Fed is expected to ease monetary policy, Rosengren said he is aware of uncertainties and downside risks but doesn’t think they’re strong enough yet to warrant the first rate reduction since late 2008 during the financial crisis. But I think w
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Fed's Rosengren not on board for rate cut: 'I think we should wait'

Boston Federal Reserve President Eric Rosengren is lining up against an apparent push to cut interest rates, telling CNBC in an interview Friday that the central bank can afford to be patient as long as the economy holds up.

Speaking just 12 days before the Fed is expected to ease monetary policy, Rosengren said he is aware of uncertainties and downside risks but doesn’t think they’re strong enough yet to warrant the first rate reduction since late 2008 during the financial crisis.

“So, given that the economy is quite strong, given that I do think that inflation is going to be very close to 2%, and given that the growth in the economy is satisfactory, I think that’s an environment where you don’t have to take a lot of action,” he told CNBC’s Sara Eisen during a “Closing Bell ” interview.

“Now, should the economy change, if the trade situation changes dramatically, if we start getting surprised by how slow China or Europe are, then that’s something we definitely should react to. But I think we should wait until we actually see the evidence that that’s happening,” Rosengren added.

That position seemingly puts him on the opposite side of Fed Chairman Jerome Powell as well as multiple other policymakers who appear inclined to approve at least a quarter-point cut at the July 30-31 Federal Open Market Committee meeting. Markets have completely priced in at least a 25 basis point reduction, with a 41% chance of a 50 basis point cut.

Rosengren joins Kansas City Fed President Esther George as the only two FOMC voters who have publicly stated they don’t see the need for a cut, at least not yet.


Company: cnbc, Activity: cnbc, Date: 2019-07-19  Authors: jeff cox
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A booming manufacturing report just poked another hole in the Fed’s case for a rate cut

Philadelphia area manufacturing rebounded sharply in July, just as the Federal Reserve is expected to cut interest rates to boost economic activity. The Philadelphia Fed saw its primary gauge measuring the sector jump from 0.3 in June to 21.8, far better than Wall Street estimates of 5 and the highest in a year. The index measures the difference between companies saying they are expanding activity against those expecting to reduce. Nearly every indicator within the index rose sharply: Employment


Philadelphia area manufacturing rebounded sharply in July, just as the Federal Reserve is expected to cut interest rates to boost economic activity. The Philadelphia Fed saw its primary gauge measuring the sector jump from 0.3 in June to 21.8, far better than Wall Street estimates of 5 and the highest in a year. The index measures the difference between companies saying they are expanding activity against those expecting to reduce. Nearly every indicator within the index rose sharply: Employment
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A booming manufacturing report just poked another hole in the Fed's case for a rate cut

Philadelphia area manufacturing rebounded sharply in July, just as the Federal Reserve is expected to cut interest rates to boost economic activity.

The Philadelphia Fed saw its primary gauge measuring the sector jump from 0.3 in June to 21.8, far better than Wall Street estimates of 5 and the highest in a year. The index measures the difference between companies saying they are expanding activity against those expecting to reduce.

Nearly every indicator within the index rose sharply: Employment doubled to 30, its highest reading since October 2017, while the average work week more than tripled to 23, its best in 14 months. Shipments jumped to 24.9 from 16.6 in June while new orders surged to 18.9 from 8.3. Prices paid, a key measure of inflationary pressures, also rose to 16.1 from 12.9.

Only unfilled orders and delivery times fell, the latter fractionally from 15.6 to 15.

In this month’s special question, manufacturers were asked to characterize underlying demand. Some 56.1% reported increases, while just 31.6% saw a decrease.

Fed officials have strongly indicated they will cut their benchmark interest rate at this month’s policy meeting, pointing to worries over a global slowdown that could infect the U.S. along with inflation that has run well short of the central bank’s 2% target and persistent tariff concerns.


Company: cnbc, Activity: cnbc, Date: 2019-07-18  Authors: jeff cox
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Mnuchin says progress being made on debt limit deal, markets shouldn’t be concerned

“I think everybody is in agreement that we won’t do anything that puts the U.S. government at risk in terms of our issue of defaulting. So I don’t think the market should be concerned, and we’re working hard. He added that everybody involved is aware of the risks that the inability to reach a deal would bring. The Treasury has been using a series of “extraordinary measures” to keep the government running while the spending impasse continues. Mnuchin earlier had said that those measures could kee


“I think everybody is in agreement that we won’t do anything that puts the U.S. government at risk in terms of our issue of defaulting. So I don’t think the market should be concerned, and we’re working hard. He added that everybody involved is aware of the risks that the inability to reach a deal would bring. The Treasury has been using a series of “extraordinary measures” to keep the government running while the spending impasse continues. Mnuchin earlier had said that those measures could kee
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Mnuchin says progress being made on debt limit deal, markets shouldn't be concerned

Treasury Secretary Steven Mnuchin told CNBC on Thursday the administration and congressional leaders are continuing toward resolving an impasse over the debt ceiling and he is confident an agreement will be reached that will ensure the U.S. does not default on its obligations.

“I don’t think the market should be concerned,” he said. “I think everybody is in agreement that we won’t do anything that puts the U.S. government at risk in terms of our issue of defaulting. I think that nobody wants a shutdown in any scenario. So I don’t think the market should be concerned, and we’re working hard. We’ll get there one way or another.”

In what he called his “most conservative” scenario, the U.S. could lose its spending ability by early September. At that point, the Treasury would not be able to make payments on its $22 trillion debt load, a potentially catastrophic event that would ripple through financial and world markets.

Both sides have been negotiating on reaching future spending limits and a longer-term agreement on continuing to allow the government the ability to borrow. There have been some indications that an agreement is near, though CNBC’s Ylan Mui reported earlier that the two sides remain significantly apart.

In the interview on “Squawk Box, ” Mnuchin said he has been having “daily conversations” with House Speaker Nancy Pelosi, D-Calif., they have reached an agreement on “top-line” spending numbers over a one- and two-year period, and are now working on “offsets” to put caps on spending.

He added that everybody involved is aware of the risks that the inability to reach a deal would bring.

“I’ve discussed that with the leadership of both the House and the Senate,” he said. “That’s why I’ve encouraged them to raise the debt ceiling before they leave.”

Lawmakers plan on leaving for their August recess on July 26.

The Treasury has been using a series of “extraordinary measures” to keep the government running while the spending impasse continues. The measures currently in use entail halting sales of state and local government series Treasury securities, redeeming existing sales and suspending any new investments of civil service and Postal Service pension funds, and suspending reinvestments of the Government Securities Investment Fund and the Exchange Stabilization Fund.

Mnuchin earlier had said that those measures could keep the U.S. afloat into November, but recently shortened the time span.


Company: cnbc, Activity: cnbc, Date: 2019-07-18  Authors: jeff cox
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Fed’s Williams hints at more aggressive rate cuts: ‘Better to take preventative measures’

Central bankers need to act quickly and forcefully when rates are low and economic growth is slowing, New York Federal Reserve President John Williams said Thursday. But not when interest rates are in the vicinity of the ZLB,” he said in prepared remarks. However, he said that when faced with low rates and slowing growth, the best strategy is to “take swift action” and “keep interest rates lower for longer.” “The expectation of lower interest rates in the future lowers yields on bonds and thereb


Central bankers need to act quickly and forcefully when rates are low and economic growth is slowing, New York Federal Reserve President John Williams said Thursday. But not when interest rates are in the vicinity of the ZLB,” he said in prepared remarks. However, he said that when faced with low rates and slowing growth, the best strategy is to “take swift action” and “keep interest rates lower for longer.” “The expectation of lower interest rates in the future lowers yields on bonds and thereb
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Fed's Williams hints at more aggressive rate cuts: 'Better to take preventative measures'

Central bankers need to act quickly and forcefully when rates are low and economic growth is slowing, New York Federal Reserve President John Williams said Thursday.

The influential policymaker delivered a speech discussing what should be done when central banks are near the “zero lower bound,” or close to as low as rates can go.

“It’s better to take preventative measures than to wait for disaster to unfold,” he told the annual meeting of the Central Bank Research Association.

Rather than keep rates elevated to give central banks room to cut in the face of a crisis, Williams said the proper move is not to “keep your powder dry.”

“When the ZLB is nowhere in view, one can afford to move slowly and take a ‘wait and see’ approach to gain additional clarity about potentially adverse economic developments. But not when interest rates are in the vicinity of the ZLB,” he said in prepared remarks. “In that case, you want to do the opposite, and vaccinate against further ills. When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress.”

Williams spoke as the policymaking Federal Open Market Committee is expected to cut its benchmark interest rate during the July 30-31 meeting. Officials are worried about persistently low inflation, spillover from a global slowdown and the fallout from back-and-forth tariffs between the U.S. and China.

The Fed currently pegs the overnight funds rate in a range between 2.25% and 2.5% — above zero, but still well below normal levels that have prevailed during past economic expansions.

Williams did not directly address whether he favors a cut, though markets are pricing in a 100% chance of a quarter-point reduction and a 38% probability that the Fed might cut by half a point, according to the CME.

However, he said that when faced with low rates and slowing growth, the best strategy is to “take swift action” and “keep interest rates lower for longer.”

“The expectation of lower interest rates in the future lowers yields on bonds and thereby fosters more favorable financial conditions overall. This will allow the stimulus to pick up steam, support economic growth over the medium term, and allow inflation to rise,” he said.


Company: cnbc, Activity: cnbc, Date: 2019-07-18  Authors: jeff cox
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Ray Dalio says gold will be a top investment during upcoming ‘paradigm shift’ for global markets

Hedge fund kingpin Ray Dalio is seeing a case for gold as central banks get more aggressive with policies that devalue currencies and are about to cause a “paradigm shift” in investing. Dalio, founder of the world’s largest hedge fund, wrote in a LinkedIn post that investors have been pushed into stocks and other assets that have equity-like returns. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. The price of gold j


Hedge fund kingpin Ray Dalio is seeing a case for gold as central banks get more aggressive with policies that devalue currencies and are about to cause a “paradigm shift” in investing. Dalio, founder of the world’s largest hedge fund, wrote in a LinkedIn post that investors have been pushed into stocks and other assets that have equity-like returns. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. The price of gold j
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Ray Dalio says gold will be a top investment during upcoming 'paradigm shift' for global markets

Hedge fund kingpin Ray Dalio is seeing a case for gold as central banks get more aggressive with policies that devalue currencies and are about to cause a “paradigm shift” in investing.

Dalio, founder of the world’s largest hedge fund, wrote in a LinkedIn post that investors have been pushed into stocks and other assets that have equity-like returns. As a result, too many people are holding these types of securities and likely to face diminishing returns.

“I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold,” the Bridgewater Associates leader said.

“Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. I will soon send out an explanation of why I believe that gold is an effective portfolio diversifier.”

The price of gold jumped higher amid Dalio’s publishing of the post, most recently up 0.7% around $1,421 an ounce.

Dalio’s call comes two weeks before the Federal Reserve is expected to cut its benchmark interest rate by at least a quarter point. That move comes after a three-year cycle of raising rates from the historically accommodative near-zero levels implemented during the financial crisis.

The fresh trends are part of what he labeled a new “paradigm shift” that comes after the last one during the crisis. Investors, Dalio said, are going to need to change their mindset about what will work after the longest bull market run in Wall Street history.


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The economic signs are moving against the Fed’s expected rate cut: ‘It just doesn’t smell right’

Justifying a policy easing against that kind of a backdrop might be tricky for the Fed, even though markets fully expect a cut this month plus perhaps two more before the end of the year. But this is not a normal time in the world of monetary policy, and the Fed is likely to follow though despite the solid economic signals. “It just doesn’t smell right given the strength of the economic data,” said Chris Rupkey, chief financial economist at MUFG Union Bank. Indeed, the latest data points to soli


Justifying a policy easing against that kind of a backdrop might be tricky for the Fed, even though markets fully expect a cut this month plus perhaps two more before the end of the year. But this is not a normal time in the world of monetary policy, and the Fed is likely to follow though despite the solid economic signals. “It just doesn’t smell right given the strength of the economic data,” said Chris Rupkey, chief financial economist at MUFG Union Bank. Indeed, the latest data points to soli
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The economic signs are moving against the Fed's expected rate cut: 'It just doesn't smell right'

If the Federal Reserve follows through on strong hints that it will be cutting interest rates in late July, it will do so in the face of a powerful consumer, a record-breaking stock market and an increasingly difficult case to make for easier monetary policy.

Justifying a policy easing against that kind of a backdrop might be tricky for the Fed, even though markets fully expect a cut this month plus perhaps two more before the end of the year. The central bank is not normally in the business of easing into an economy that is showing few signs of a recession, generally holding fire until more pronounced signs of a slowdown are in view.

But this is not a normal time in the world of monetary policy, and the Fed is likely to follow though despite the solid economic signals.

“It just doesn’t smell right given the strength of the economic data,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The consumer is back in a big way. You really have to ask yourself why they are going to cut rates.”

Indeed, the latest data points to solid consumers, who accounted for 67.4% of economic activity in the first quarter.

Retail sales rose 0.4% in June, according to Commerce Department figures that easily topped the 0.1% expected gain. On a year-over-year basis, sales increased 3.4%.


Company: cnbc, Activity: cnbc, Date: 2019-07-17  Authors: jeff cox
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Powell says ‘uncertainties’ have increased chances of a rate cut

Federal Reserve Chairman Jerome Powell repeated his pledge to “act as appropriate” to keep the economic expansion going as his fellow central bankers move toward an expected interest rate cut later this month. “Many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for a somewhat more accommodative stance of policy,” Powell said in prepared remarks. The speech comes as market participants are strongly anticipating a


Federal Reserve Chairman Jerome Powell repeated his pledge to “act as appropriate” to keep the economic expansion going as his fellow central bankers move toward an expected interest rate cut later this month. “Many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for a somewhat more accommodative stance of policy,” Powell said in prepared remarks. The speech comes as market participants are strongly anticipating a
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Powell says 'uncertainties' have increased chances of a rate cut

Federal Reserve Chairman Jerome Powell repeated his pledge to “act as appropriate” to keep the economic expansion going as his fellow central bankers move toward an expected interest rate cut later this month.

In speech delivered Tuesday in Paris, the central bank chief detailed misgivings among Fed officials over trade developments and global growth that have caused “uncertainties” over the outlook to increase. In addition, he said there is concern over negotiations regarding the federal debt ceiling, Brexit and “a more prolonged shortfall” in inflation below the Fed’s 2% goal.

“Many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for a somewhat more accommodative stance of policy,” Powell said in prepared remarks. “We are carefully monitoring these developments and assessing their implications for the U.S economic outlook and inflation, and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.”

The speech comes as market participants are strongly anticipating a rate cut at the July 30-31 Federal Open Market Committee policy meeting. Traders have priced in a 100% chance of a reduction in the overnight funds rate from its current targeted range of 2.25% to 2.5%.

From there, the market expects possibly two more cuts coming by the end of 2019 or early 2020, according to fed funds futures contracts and the CME’s FedWatch tool.

Powell did not indicate how much policy loosening was coming, and his remarks were generally positive about economic growth, particularly in the labor market and an unemployment rate near a 50-year low.

He noted weakness in manufacturing and business investment against some improvement in consumer spending.

In addition, Powell noted the influence that actions from other central banks can have on U.S. policy.

“We have seen how monetary policy in one country can influence economic and financial conditions in others through financial markets, trade, and confidence channels. Pursuing our domestic mandates in this new world requires that we understand the anticipated effects of these interconnections and incorporate them into our policy decisionmaking,” he said.

The European Central Bank has indicated that it plans on keeping its own policy easy as it copes with a slowing economy.


Company: cnbc, Activity: cnbc, Date: 2019-07-16  Authors: jeff cox
Keywords: news, cnbc, companies, policy, inflation, uncertainties, economic, trade, federal, market, increased, powell, rate, central, chances, cut, speech


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Fed’s Charles Evans says he’d be comfortable with ‘a couple’ rate cuts before the end of the year

Chicago Fed President Charles Evans said Tuesday that low inflation, along with economic uncertainty, indicate a need for up to two rate cuts before the end of 2019. He added that two rate cuts may not even be enough over the longer run as the Fed grapples with consistently low inflation as well as tensions over trade and a slowing global economy. In an interview with CNBC’s Steve Liesman, Evans said he would advocate multiple rate cuts, which market participants are widely expecting. “Unless I


Chicago Fed President Charles Evans said Tuesday that low inflation, along with economic uncertainty, indicate a need for up to two rate cuts before the end of 2019. He added that two rate cuts may not even be enough over the longer run as the Fed grapples with consistently low inflation as well as tensions over trade and a slowing global economy. In an interview with CNBC’s Steve Liesman, Evans said he would advocate multiple rate cuts, which market participants are widely expecting. “Unless I
Fed’s Charles Evans says he’d be comfortable with ‘a couple’ rate cuts before the end of the year Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-07-16  Authors: jeff cox, laura wronski, senior research scientist, surveymonkey, jon cohen, chief research officer
Keywords: news, cnbc, companies, charles, end, inflation, economic, president, couple, evans, feds, thats, hed, cuts, fed, stronger, economy, rate, comfortable, think


Fed's Charles Evans says he'd be comfortable with 'a couple' rate cuts before the end of the year

Chicago Fed President Charles Evans said Tuesday that low inflation, along with economic uncertainty, indicate a need for up to two rate cuts before the end of 2019.

Evans spoke Tuesday at CNBC’s @Work Human Capital + Finance Conference in Chicago.

He added that two rate cuts may not even be enough over the longer run as the Fed grapples with consistently low inflation as well as tensions over trade and a slowing global economy.

In an interview with CNBC’s Steve Liesman, Evans said he would advocate multiple rate cuts, which market participants are widely expecting.

“Unless I had great reason to think that that would somehow create a lot of inflation, yes, I think that’s right,” he said. “I think on the basis of inflation alone, I could feel confident in arguing for a couple of rate cuts before the end of the year.”

This comes shortly after Fed Chairman Jerome Powell said in Paris that the central bank remains committed to sustaining the economic expansion and will “act as appropriate” to see that through. The language has generally been interpreted as a tip toward a rate cut coming at the July 30–31 Federal Open Market Committee policy meeting.

Despite generally solid economic data, markets have been looking for rate cuts to keep competitive with other easing global central banks and a raft of “uncertainties,” as Powell put it, that are cropping up at home and abroad.

Evans, who is a voting member on the FOMC this year, emphasized the importance of getting inflation to the Fed’s 2% target, which it considers healthy for a growing economy, and said he would even like to see a slight overshoot.

“In order to get inflation up to 2.25% over the next three years, I need 50 basis points of more accommodation,” he said. “Maybe that’s not quite enough. I think that would increase inflation expectations, and that would help.”

It’s not just markets that have been clamoring for a rate cut. President Donald Trump also has been pressuring the Fed to ease up on policy and has said that without the nine rate hikes since December 2015, the economy would be much stronger than even its current above-trend pace.

Evans said it’s important that the Fed remain independent from political pressure, though he conceded that the economy might be running hotter without the rate hikes.

“It would have been stronger if we hadn’t raised rates — there can be an argument for that,” he said. “We’ve gotta be very careful on how you think about it, and there’s so much going on. I think the risk-management argument is a good one.”


Company: cnbc, Activity: cnbc, Date: 2019-07-16  Authors: jeff cox, laura wronski, senior research scientist, surveymonkey, jon cohen, chief research officer
Keywords: news, cnbc, companies, charles, end, inflation, economic, president, couple, evans, feds, thats, hed, cuts, fed, stronger, economy, rate, comfortable, think


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