Published: Thu, September 19, 2019
Markets | By Otis Pena

A couple of takeaways from the Fed and Powell

A couple of takeaways from the Fed and Powell

The U.S. Federal Reserve cut interest rates by a quarter of a percentage point for the second time this year on Wednesday in a widely expected move meant to sustain a decade-long economic expansion, but gave mixed signals about what may happen next.

The board reiterated that the BOJ "will not hesitate to take additional easing measures" if there is a greater possibility that the momentum toward the 2 percent target will be lost, as Governor Haruhiko Kuroda repeated at the previous press conference following the policy meeting in July.

However, the BoJ has been reluctant to add more stimulus, believing that most of its remaining policy options - such as deeper negative interest rates - would have unpleasant side effects and pose risks to financial stability. At one point he asked whether Powell or China's president, Xi Jinping, was "our bigger enemy".

The language in the Fed's statement highlighted the continually soft business fixed investment and lower inflation, and noted uncertainties around the future outlook.

President Trump and Federal Reserve Chair Jerome H. Powell have been locked in a standoff for months over what kind of stimulus, if any, is needed to shore up the US economy.

In economic projections released on Wednesday, Federal Reserve policymakers said they expect the economy to grow 2.2% this year, faster than they forecast in June. "Jay Powell and the Federal Reserve Fail Again", he wrote, one of 30 such statements about Fed policy since the July meeting. Division is growing at the Fed as seven members are calling for another cut this year. "No 'guts, ' no sense, no vision!" That would knock the Fed rate down to between 1.75% and 2%.

No one anticipates rates to fall below 1.5% in 2020, a sign that the current turbulence from a global slowdown and President Donald Trump's escalation of the trade war with China is viewed as manageable.

'Don't listen to me, listen to the scientists,' Greta tells Congress
Friday's speakers, however, will be youth organizers from high schools in the region. She was joined on stage by some young American activists.

The Federal Reserve is cutting rates for a second time this year while saying it's prepared to continue doing what it deems necessary to sustain the USA economic expansion.

Mr. Powell has said the Fed doesn't make policy decisions based on demands from political leaders and instead focuses on its congressional mandate to boost employment while keeping inflation stable.

At the same time, the Fed's key rate is already low by historical standards, and continuing to lower it could fan stock market and other financial bubbles while leaving the central bank with less ammunition to cut rates when the next economic downturn comes.

The Fed's benchmark rate rose to 2.3% on Tuesday, trading outside of its range of 2% to 2.25%, after technical factors and monetary and regulatory changes created shortages of funds for banks.

Japan's central bank on Thursday held overnight interest rates at minus 0.1 per cent, its target for ten-year bond yields at around zero per cent, and the pace of its asset purchases at a pace of ¥80tn ($740bn) a year.

The last few days alone have presented new challenges: an oil supply shock after a drone strike on a Saudi Arabian crude-processing center and a repo market facing a liquidity crunch.

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