قالب وردپرس درنا توس
Home / Business / Economic uncertainty is why Trump was winning his war with the Federal Reserve

Economic uncertainty is why Trump was winning his war with the Federal Reserve



Yet that highly anticipated policy decision will no longer be the result of the president's unprecedented public assault on the Fed, including demands not to " blow it," as the product of tremendous uncertainty caused by the trump administration's erratic trade was with China and other countries which has weakened global growth and dampened investment.

Powell and other Fed governors have already telegraphed they plan to move ahead with a cut when they hold their regular two -day meeting next week, a reversal from earlier plans to steadily raise interest rates this year.

"It's pretty easy to explain the Fed's pivot with factors other than trump talking," said Kevin Burgett, an economist at Monetary Policy Analytics.

Central bankers around the world, including in the US, are thus struggling to

The Fed has dramatically shifted its trajectory to interest rates since Powell assumed his role as chair in February 201

8. After years of the country's interest rates stagnating, the central bank began to move towards the US economy.

Trump's 2017 tax cut package and massive spending bill are slated for approval

"What we saw in the second half of last year has really changed the picture," said William Foster, vice president and senior credit officer at Moody's Investors Service.

[194559009] Shifting messages

Shifting messages by the Fed in December to continue to raise awareness rates in 2019 so unnerved investors, triggering a market selloff as they feared the Fed was brushing aside the potential impact of a trade with China and wondered, "How bad can this get?"

"Investors started to get really concerned about the Fed's messaging that it's going to continue to tighten, despite this to the global economy," Foster said ,

[January192006] Powell's fed what began to send a different message To Wall Street, it would not hurt to recover.

"The Fed, in my opinion, always pays way too much attention to the stock market," said Douglas Holtz-Eakin, president of the American Action Forum, at independent economic think tank. "They should not pay zero, but they pay more than zero, and the President is obsessed with it, and hey at the Fed, and this loop is a bad one, from the point of view of the fundamentals of policy . "

The case for a rate cut has been strengthened since policymakers met in May.

Then that trajectory abruptly changed. Talks between the world's two largest trading partners collapsed and signs of a slowdown in Europe and China began to emerge.

Powell has delicately tried to avoid pinning the Fed's rational for a cut directly on the President's trade wars, pointing more broadly to weakening globally growth and inflation struggling to meet the central bank's 2% target. He's looking to make the case that the Fed, along with the other central banks around the world, must act sooner rather than later to get ahead of a downturn.

"If you see weakness, it's better to come sooner than later," Powell said in an appearance before the Council on Foreign Relations in late June. "I think most central banks would want to act preemptively and not let a downturn gather steam, in a sense, the thought being an ounce of prevention is worth a pound of cure."

Little Wiggle Room

Krishna Guha, who heads global policy and central bank policy as vice chairman of Evercore ISI, says central bankers today know they have much less room to respond with interest rates at historically low levels coupled with subdued inflation. The federal funds rate, which affects the costs of credit cards, mortgages and other borrowing, hovers between 2.25% and 2.5%.

"Because you have a limited amount of ammunition, you should not wait until things get too bad," said Guha. "You should be willing to act early, act aggressively, act preemptively even if this is actually in the dimension of risk rather than economic weakness more bang for your buck. "

Investors Wants to Hang Up on Powell's Message Wednesday, listening for the next week and what's next.

Markets swooned last week after New York Fed President John Williams delivered a speech making the case for central banks to act aggressively and take precautionary measures based on 20 years of history. 50-base point cut, unlikely outcome.

Still, not all policymakers are in agreement with Powell's plans just yet. Boston Fed President Eric Rosengren told CNBC last Friday that it's not necessary to say it's necessary at this time. Others – like St. Louis Fed President James Bullard – had already made some sort of "security cuts".

"Trade uneasiness," Bulldog said in an exclusive interview with CNN's Julia Chatterley on "First Move." "The President has made it to the front burner."

CNN's Lydia DePillis contributed to this report.


Source link