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JACKSON HOLE, Washington (August 23): When Federal Reserve Chairman Jerome Powell speaks Friday in Jackson Hole, Wyoming, traders will review his remarks to find out whether the US central bank will do more. rate cuts this year.
They may be disappointed.
Despite his reputation as the most serene person to run the US central bank for decades, if ever, Powell might be reluctant in his remarks to other central bankers at the Kansas City Fed's economic symposium this year. year to find out more about going rates. The reason: he may not really know and will not stay locked up.
Fed policymakers, even those who supported the July rate cut, signal reluctance to do more, Philadelphia Fed chief Patrick Harker, calling for a wait-and-see approach and the Dallas Fed chief Robert Kaplan, claiming that he is "open minded" but that he would "would like to avoid having to take further action. "
Since the Fed lowered rates in July, the economic situation in the United States has darkened.
President Donald Trump's new threats to impose additional tariffs on China, and the decision to postpone some of these new taxes in December, are fueling an already increased uncertainty for businesses.
US plant activity is down.
Globally, dozens of central banks are cutting rates, and some economies are on the verge of falling into recession.
Finally, signaling that investors are increasingly worried about the US recession, yields on 2-year Treasury bonds fell below their 10-year debt on Thursday in a new "inversion of the yield curve."
At the same time, labor markets remain strong and consumers continue to spend in stores and online.
The reversal of the yield curve is partly due to the fact that the US economy remains much stronger than a large part of Europe: investors would prefer to have "safe" US Treasury bonds, even with yields in the US. down, rather than negative German bonds.
Beyond the conflicting economic data, market signals and dissension within the Fed, Powell may also want to show restraint not to attract even more vitriol than the first Fed chief to have been publicly qualified as "clueless" by the president who appointed him. him.
"The economy is doing very well. The Federal Reserve can easily create a record! Trump said on Twitter on Thursday. "Be early (to change), not late. Let America win big instead of winning!
Even though Powell was sticking to a fixed point, describing the measure taken last month as a "mid-cycle" adjustment and preserving his options for the future, he could still disappoint markets and woo again more turbulence.
Investors, however, are hopeful that the Fed will stimulate the economy, overwhelmingly placing the central bank to reduce borrowing costs again at its political meeting on Sept. 17-18.
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