Federal Reserve Lower Rates 25 bps as Expected, Monitoring Economic Growth

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    Helmholtz Watson

    The Federal Reserve as expected cut rates to…


    Helmholtz Watson

    Fed chair Powell’s opening statement:

    Oct 30 2019

    We cut to provide insurance against ongoing risks
    We believe monetary policy is in a good place
    Fed continues to expect the economy to expand at a moderate rate
    Many who have struggled are now getting opportunities
    Inflation pressures remain muted
    We’re mindful that low inflation could push down inflation expectations
    Weakness in global growth and trade pose ongoing risks

    Helmholtz Watson

    [b]Fed Powell Q&A:
    It would take a ‘material reassessment’ of outlook to shift stance
    Risks to the outlook have shifted more positively
    Consumer facing companies say consumers doing well
    Economy has been resilient to winds blowing this year
    Today’s business investment in GDP was weak
    Says he was generally referring to less uncertainty on trade


    PCE deflator month-to-month 0.0% versus 0.0% estimate. No revision to 0.0% last month

    PCE deflator year on year 1.3% vs 1.4% estimate. That is down from 1.4% last month

    PCE core deflator MoM for September 0.0% versus 0.1%. Down from 0.1% gain last month
    PCE core deflator YoY 1.7% versus 1.7% estimate. That is down from 1.8% last month

    Saving rate 8.3% versus 8.1%

    The PCE inflation data remains below the 2.0% targets from the Fed.


    Boston Feds Rosengren voted against the October rate cut:

    Nothing that has come in since October meeting with change view that the last rate cut was not needed
    US economy is in pretty good shape right now, GDP looks to be growing around potential

    Recall Esther L. George and Eric S. Rosengren voted against the rate cut, they preferred to maintain the target range at 1-3/4 percent to 2 percent.


    Fed Powell.Highlights

    Monetary policy is appropriate and will likely stay that way
    Economic outlook favorable.
    Monetary policy and the economy are in a good place.
    Risks are global slowdown and trade
    Fiscal policy is unsustainable
    We don’t know where maximum employment is. The Fed needs to let the data speak and the data is not sending any signals that labor market is so hot or that inflation is moving up.

    Helmholtz Watson

    FOMC Federal Reserve meeting minutes:

    Most judged level now appropriate barring a ‘material’ reassessment of the outlook
    ‘A couple’ said Fed should reinforce statement with communications that another rate cut unlikely without signs of a ‘significant slowdown’
    Many said rate cut warranted due to global weakness and trade uncertainty
    Some favored keeping rates steady and argued outlook was favorable and inflation expected to rise
    A couple supported rate cut but said it was a close call
    Several concerned some banks had reduced capital buffers when the should be rising
    Discussed that risks to the economic outlook remained tilted to the downside


    Highlights of the Fed’s November Beige Book

    This report was prepared at the Federal Reserve Bank of Dallas based on information collected on or before November 18, 2019. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

    Outlook generally positive
    Employment continued to rise slightly overall even as labor markets remained tight across the country
    Vast majority of 12 districts continued to note difficulty in hiring workers
    Some contacts noted their inability to fill jobs was constraining business growth
    Wage pressures rose at modest pace
    Stable to moderately growing consumer spending and increases in Auto sales and tourism were seen across several districts
    More districts reported an expansion in manufacturing than in prior period

    Economic activity continued to expand moderately. Growth remained solid in services and retail, and down-shifted slightly in manufacturing. Home sales remained on the rise while energy activity continued to decline. Selling prices were largely flat, as firms’ ability to pass through cost increases remained limited. Hiring continued at a steady pace. Outlooks were generally improved, though uncertainty remained elevated.


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