Powell's lyrics may have been interpreted – News

The governor of the US central bank was looking forward to supplying the US stock market last night. In a normative speech delivered before the New York Economic Club, Mr. Powell said that the US interest rate was "just below" what he called a neutral territory.

These words pushed Wall Street to post its best trading day since March and the S & P 500 index rose 2.3%.

The big question, though, is whether the market overstates Powell's comments? The Wall Street Journal newspaper refers to a statement by Powell in October, in which he called the policy rate "distant" from the neutral level, which underlies the positive reaction.

I think you should pay attention to the interpretation. Powell says the interest rate is close to neutral but that the neutral level has a very wide spread at the same time, explains Anna Breman.

Large fluctuations

Since October, the stock market has generally experienced an extremely volatile period, characterized by strong fluctuations, in particular because of the rise in interest rates, but also by a slowdown in the economic cycle and commercial roles. Anna Breman points out that Powell's comments can provide market participants with leeway.

I do not want to call it wishful thinking, but I think you underestimate that Powell was not as clear as he had been interpreted.

The United States has also gone the long way with its interest rate hikes and investors are now counting on a fourth for the year in December from the Federal Reserve. This development has, in turn, been sharply criticized by President Donald Trump, who has repeatedly beaten on Twitter against Jerome Powell, whom Trump himself named early in the year. In an interview with the Washington Post, the president recently said that he "was not even happy with Powell".

Is the central bank now turning to Trump?

No, I do not really believe it, but the Fed is strong. We have a tradition of being independent. The statement yesterday can be interpreted as such, but I think the Fed will make the best policy for the US economy.

Time for the G20 meeting

Later in the week, the focus will be on the G20 meeting in Argentina, where Trump will meet Chinese President Xi Jinping for discussions on commercial tariffs. How such a conversation will unfold is also important for market movements.

Now that we have seen this turmoil, everyone really wants to have positive signals. If there are signs that the trade war is not going to intensify, it may be interpreted positively, but the signals were mixed before the meeting, said Anna Breman.

I think politicians are more sensitive to what the stock market does than the central bank. The press is different than the voters, which means that there is a desire to calm the market.