- 1st August 2019
- Posted by: Hakeem
- Categories: Economics, Finance & accounting, FOREX MARKET ANALYSIS
- Fed Chairman Jerome Powell sends the market reeling after he says the Fed’s first rate cut in a decade does not mean policymakers will follow up with an aggressive rate-reducing regime.
- Powell calls the cut a “midcycle adjustment” and describes it as the latest move in a policy transition that started with its last hike — at the end of last year.
- The markets had been widely expecting a very dovish Fed and instead heard a more hawkish commentary from Powell.
Stocks cratered, the dollar hit a more than two-year high and bond yields ripped higher after Fed Chairman Jerome Powell suggested that policymakers were not embarking on a new cycle of rate cutting, after it trimmed the fed funds rate by a quarter point Wednesday.
Markets have been on tenterhooks, once expecting three rate hikes this year, and then an easy Fed policy stance, even as the economy has been showing signs of improvement. But the Fed has been facing the unusual task of explaining why it was cutting rates in the face of stronger economic data.
Traders said there was disappointment with the Fed’s statement, which was perceived more as neutral than dovish, but when Powell later said during a press briefing that the Fed’s action was a “midcycle adjustment to policy” that sent markets reeling.
“I think by that it means he doesn’t necessarily mean more cuts are coming, maybe not necessarily one off but not indicative of more aggressive cuts,” said Ben Jeffery, a fixed income strategist at BMO.