[ad_1]
Federal Reserve Chairman Jerome Powell holds a press conference at the end of a two-day policy meeting of the Federal Open Market Committee in Washington, DC, on January 30, 2019.
Leah Millis | Reuters
Even with President Trump and the markets calling for lower interest rates, the Fed has no chance to move when it meets next week, but it should help lower interest rates later this summer.
The schedule of a Fed rate cut, the first in more than ten years, must be the subject of debate. But such a shift has become more common in the markets, after weak job data in May and lower than expected consumer price inflation.
A growing group of economists and investors expect a rate cut in the middle of the summer, at the July 30-31 meeting. There are also those who expect the Fed to wait until September, taking into account more data before cutting rates. There are also some, like the economists at Goldman Sachs, who do not expect any downsizing this year.
Economists expect the Fed to bend its message in favor of lowering rates, officials lowering their interest rate expectations in the "dot chart," a graph that anonymously reflects forecasts rate of each Fed official. They should also reduce their prospects for economic growth and recognize lower inflation.
"For now, they will only give a very accommodating message that goes in the direction of a rate cut in July," said Joseph LaVorgna, chief economist at Natixis. "The market is worried enough about China's weakness, insufficient inflation and the possibility that tariffs are disrupting the global supply chain that's difficult for me. to not think that the Fed will not act faster than people thought. "
President Donald Trump has again criticized the Fed and its chairman, Jerome Powell, for the Fed's interest rate policy this week, ABC News said. the Dow would be 10,000 points higher if the Fed did not raise interest rates. Economists believe that the President's assault on the Fed should not affect its interest rate decisions.
The Fed meeting is expected to be the most important event for the markets of the coming week, but there are also some data including Friday's manufacturing and services PMIs, as well as Tuesday housing starts and sales Friday.
Michael Gapen, chief US economist at Barclays, has advanced his forecast for a first rate cut until July, starting in September, after last May's weak employment report, which had only 75,000 non-farm jobs. He expects the Fed to use more firepower than some economists and that it starts with a reduction in rates of half a percent instead of a reduction of $ 1. 39, a quarter of a point.
Gapen expects the Fed to change its statement and forecasts, which will be released after its meeting on Wednesday afternoon. "I'm looking for a slight worsening of the outlook that could figure in their forecasts, as well as in their description of business spending … They must recognize that vulnerabilities have increased. I think they can highlight global growth and uncertainty of trade, I think they are moving away from the "patient" and are showing flexibility. "
In the Fed's point chart, no rate changes are expected in 2019, and this should change. Fed officials could also change their GDP forecasts. The median central trend is currently 2.1%. The expected median inflation was 1.8%, but could fall, with PCE inflation at 1.6%.
Futures federal funds announced Friday market expectations of about 20% chance of a rate cut next week and about 80% for the month of July. The Fed's latest interest rate hike in December raised the range of federal funds futures from 2.25 to 2.50%.
After this meeting, the Fed changed its position and added that she would be "patient", suspending her policy while she was watching the changing economic situation. Economists are now waiting for them to give up the word, thus indicating their willingness to go ahead with rate cuts.
A chance for a cup next week?
Diane Swonk, chief economist at Grant Thornton, said the Fed should act next week without waiting for July. She said she became convinced that Fed officials were willing to cut rates after attending a Fed conference in Chicago earlier this month. Fed Chairman Jerome Powell and other Fed officials have made it clear that the Fed will act to help the economy if it needs it.
Fed Vice President Richard Clarida told CNBC at the conference that the Fed would act as needed. "We are going to put in place policies that need to be put in place to keep the economy, which is very well positioned right now, and it's our job to maintain it," he said. in an interview at the Fed's conference in Chicago.
"They were all vocal enough about it – it was a major change," Swonk said. "Could they wait until July, of course.My opinion is that if you want to do it, do it now because you can control the story.It's important for the Fed to control the narrative. . "
Swonk said the Fed could send a confused message next week, if it does not cut. "The points will go down, they have to remove the word" patient ", they have to recognize a weaker labor market, a weaker growth, all that and the point charts are going down." For me, it's more confusing only clarity when anyway, you will do it in six weeks, "she said.
Jefferies' economists are the opposite of the debate and their forecasts do not provide for a reduction in the interest rate.
"If the trade talks break down completely and our trade relations with China have a permanent negative impact, we will have a rate cut, but we do not expect another solution," said Tom Simons, money market economist Jefferies.
What to watch
On Monday
8:30 am Manufacturing of the Empire State
NAHB
16:00. ICT data
Tuesday
FOMC starts the 2-day meeting
Earnings: Adobe, Jabil Circuit, La-Z-Boy, Parsons
8:30 am Housing starts
8:30 am: Survey of Business Leaders
Wednesday
Earnings: Oracle, Winnebago, Barnes and Noble, American Outdoor Brands
2:00 p.m.. Fed statement
2:30 pm in the afternoon. Fed Chairman's Briefing, Jerome Powell
Thursday
Earnings: Darden Restaurants, Canopy Growth, Red Hat, Kroger, Commercial Metals
8:30 am The first complaints
Philadelphia Fed survey at 8:30
8:30 am Current account
Friday
Earnings: CarMax
9:45 manufacturing PMI
9:45 am PMI services
10:00 am Sale of existing homes
12:00 PM President of the Cleveland Fed, Loretta Mester
[ad_2]
Source link