- 14th September 2019
- Posted by: Muff lbr
- Category: Economics, Finance & accounting
- Strategists expect the Fed to trim the Fed funds target rate range by a quarter point when it meets this week, but what comes next is more important.
- The markets could react negatively if the Fed doesn’t make it clear that it plans to cut rates again.
- Optimism for a trade deal pushed stocks near all-time highs in the past week and triggered the biggest weekly move in interest rates in nearly three years.
- There are a few economic reports in the coming week, including industrial production, housing starts and existing home sales.
The Federal Reserve is expected to cut interest rates by a quarter point on Wednesday, but what it says about its future plans will determine whether stocks continue their run at record highs.
Tensions around this month’s rates meeting decision are high. Fed Chairman Jerome Powell faces dissent from within the Fed board from some members who don’t believe the economy is weak enough to warrant cutting rates. Two members opposed the last rate cut, and even more could oppose this one.
The Fed is also under pressure from financial markets that threw a tantrum earlier this summer on concern the Fed was moving too slowly to stave off a recession. On top of that, the Fed faces an unprecedented level of criticism from the White House, with President Donald Trump repeatedly criticizing the Fed board and Powell, himself, for not cutting interest rates fast enough. This week, the president went so far as to call Fed officials “boneheads” and demanded they take the fed funds rate to zero or even a negative level.