Tags: fed | easing | preemptive

Investors Can Be Relatively Sure Fed 'Easing' Is on Its Way

Investors Can Be Relatively Sure Fed 'Easing' Is on Its Way
(Matthew Veldhuis/Dreamstime.com)

By    |   Tuesday, 09 July 2019 04:27 PM

President Donald Trump made last Friday interesting comments about the Federal Reserve’s monetary policy via Twitter writing, “Strong jobs report, low inflation, and other countries around the world doing anything possible to take advantage of the United States, knowing that our Federal Reserve doesn’t have a clue! They raised rates too soon, too often, & tightened, while others did just the opposite.... As well as we are doing from the day after the great Election, when the Market shot right up, it could have been even better - massive additional wealth would have been created, & used very well. Our most difficult problem is not our competitors, it is the Federal Reserve!"

That said, President Donald Trump definitively appears unsatisfied by the Fed’s monetary policy, but in fact, cannot do more than hope the Fed will cut the Fed funds rate with “more” than 0.25 percent on July 31 when the Federal Open Market Committee (FOMC) will conclude its 2-day meeting where the Fed’s “near-term” monetary policy will be decided.

As things stand today, at least that’s how I see it, only a “Pre-emptive” rate cut of 0.25 percent seems to be in the cards, which is of course of great importance to the financial markets, investors, and the overall U.S. economy as a whole.

From now till July 31 we’ll also still have a lot of fresh data and events to digest that will impact/guide the Fed’s decision.

In the meantime we’ll also have this week on Fed level, among other things of course, Fed Chair Jerome Powell who will deliver his semi-annual Monetary Policy Report to Congress on Wednesday and Thursday.

On Wednesday, the Federal Open Market Committee (FOMC) will also release its June meeting “minutes,” which will give the financial markets more/better insight on the decision making process at the last Fed monetary policy meeting that concluded on June 19 and where the Fed funds rates remained unchanged.

For investors, both of these events are important for providing “hints” where rates “could” be headed for over the near-term.

Last Friday, the Federal Reserve has published its semiannual “Monetary Policy Report” that is submitted to the Senate Committee on Banking, Housing, and Urban Affairs and to the House Committee on Financial Services.

For investors, this “Report” is certainly worth a look at as it gathers a huge amount of broad-based global information that could help in making investment decisions.

For example, the “Report” points on page 30 to a number of factors that have likely contributed to the recent slowdown in trade and manufacturing growth.

New tariffs appear to have lowered imports and exports in the United States and elsewhere, while uncertainty surrounding trade policy could be leading firms to delay investment decisions and reduce capital expenditures.

A downturn in “global” sales for technology goods has restrained trade and manufacturing activity while a general slowdown in global demand, reflecting idiosyncratic factors specific to different economies, has likely weighed on demand for traded goods.

On the “Nominal” Treasury yields the “Report” explains that the “nominal” yields moved significantly lower over Q1 of 2019, largely reflecting investors’ concerns about trade tensions and the global economic outlook, as well as expectations of a more accommodative path for the federal funds rate than had been anticipated earlier.

So, investors can be relatively sure that Fed “Easing” is on its way and a Fed “Pre-emptive” cut on July 31 wouldn’t surprise nobody, which doesn’t mean that it’s absolutely necessary.

This report of the Fed gives a “good and relatively compact” overview of the FOMC decisions as of lately as well as the Fed’s analysis of the world as a whole that could be of help to investors who want to get a somewhat better documented idea of what, for example, the FOMC could decide on the Fed funds rates and hopefully give somewhat of forward guidance at the end of this month on July 31.

Yes, the month of July could become an interesting month…

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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So, investors can be relatively sure that Fed “Easing” is on its way and a Fed “Pre-emptive” cut on July 31 wouldn’t surprise nobody, which doesn’t mean that it’s absolutely necessary.
fed, easing, preemptive
Tuesday, 09 July 2019 04:27 PM
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