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Heading into this weekend's G20 and with criticism from President Trump Federal Reserve Chairman Jerome Powell spoke at the New York Economic Club with decidely more dovish rhetoric talking of rates hikes mainly in the past tense and current rates "just below' neutral.

Fed Jerome Powell

Key Quotes 

"While FOMC participants' projections are based on our best assessments of the outlook, there is no preset policy path. We will be paying very close attention to what incoming economic and financial data are telling us."

"We therefore began to raise our policy rate gradually toward levels that are more normal in a healthy economy. Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth."

"Our gradual pace of raising interest rates has been an exercise in balancing risks."

"Our path of gradual increases has been designed to balance these two risks."

"We therefore began to raise our policy rate gradually toward levels that are more normal in a healthy economy."

"We also know that the economic effects of our gradual rate increases are uncertain, and may take a year or more to be fully realized

The Reaction

  • EURUSD 1.1282 to 1.2362
  • AUDUSD .7240 to .7320
  • USDJPy 114 to 113.50
  • SPX 500 2694 to 2722

The immediate thought is the Federal Reserve is content with the current rising interest rates path but near is good enough and that inflation is in check and he not worried about trade wars 'overly'.

There is little doubt everything about this Fed, and has been for a long time is about appeasing the stockmarket and it's particpants (read banks) not main street. This is a man I should remind that didn't blink when his tenure began with one of the fastest 10 percent falls in US stockmarkets in history. including the biggest Dow Jones point loss ever. Those days appear to have changed with the lehgetht trade war, President Trump' critiscim of Chairman Powell and the crashing oil price.

Is the Fed Put back on"

There is little doubt that the last successive Fed chairs has lulled markets into complacency and a concept of no risk. Former Fed chair Janet Yellen had  even said the stockmarkets will not crash in her lifetime at one point.. The idea of a Fed “put” option under the three prior Fed leaders; Janet Yellen, Ben Bernanke and Alan Greenspan has been a feature of the bull market run since 2009. The US markets have reached a new level of silliness, no risk appreciation of trade wars, conflicts in Europe, political breakdowns in the U.K.. Germany and France. The nonsense that is Turkey politics. A new regime in Mexico, laughable NAFTA talks. The threat of Iran. What direction does China go? We could go on but what's it matter, market players will tell you it doesn't and its different this time.


From The TradersCommunity Research Desk

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