Bank Deals Blog: Fed / Banking News

The Fed’s two-day meeting started today. The meeting announcement is scheduled for 2:00 PM EDT Wednesday. Along with the announcement, the Fed will be releasing its quarterly Summary of Economic Projections (SEP), which includes the “dot plot” that shows FOMC participants’ expectations of the future federal funds target rate. Following these releases, a press briefing by Fed Chair Jerome Powell will take place. The odds still show a 25 bp rate cut is the most likely outcome, but the odds of the Fed holding rates steady have been rising.

The mixed jobs report that was released Friday will probably not have much effect on what the Fed decides at its meeting next week (Sep 17-18). The number of jobs added in August was below analysts’ expectations, but as this Barron’s article describes, the jobs report wasn’t all negative. Besides the disappointment in the jobs number, “other labor-market indicators suggest conditions for American workers are solid.” As economist Tim Duy described in his recent Fed Watch blog post, the “employment report for August 2019 revealed a slowing albeit arguably solid...

The next FOMC meeting is scheduled to begin in just two weeks on September 17th. I’m afraid the odds still point to another 25 bp rate cut. Today’s release of the ISM manufacturing index increased the odds of a rate cut. The release indicated that U.S. manufacturing contracted, which is the first time in three years. Part of the Fed’s justification to cut rates in July was trade policy uncertainty and its impact on manufacturing. As Fed Chair Jerome Powell said at his Jackson Hole speech, “Trade policy uncertainty seems...

Last Friday, Fed Chair Jerome Powell delivered an important speech at the annual Jackson Hole conference. No significant news came from the speech to indicate policy changes. The speech did highlight how the uncertainties and downside risks have increased since the July FOMC meeting. Below are a couple of excerpts:

Even though the downside risks may have increased, the U.S. economy has held up well, which should deter the Fed from making any large rate cuts. Fed Chair Powell’s speech provided the following views of the U.S. economy immediately following the...

With all the talk about how the Fed should cut rates, an important point seems to have been missed. This point was described well in this MarketWatch opinion piece (the bold emphasis is mine):

When you compare this rate-hiking cycle with past cycles, the Fed clearly did not raise rates too fast or too high. As the article warns, there isn’t much room for rate cutting, and with the current state of the economy still being quite strong, aggressive rate cuts don’t make sense. That’s why Fed Chair Jerome Powell called...

After the July Fed meeting, Fed Chair Jerome Powell told reporters that the Fed’s decision to cut rates should be interpreted as a “mid-cycle adjustment” and not a start of a long series of cuts that occurs when there’s a recession or a very severe downturn. Since that day, signs have started to point to a long series of cuts rather than a mid-cycle adjustment. Recession fears appear to be growing as trade tensions increase. Wall Street economists have been coming out with new forecasts for slower growth and rising...

Last week the Fed cut rates for the first time in more than ten years. The target range for the federal funds rate was lowered 25 basis points to 2.00%-2.25%. It wasn’t enough for the markets which wanted a larger cut and more certainty on future cuts.

The FOMC statement justified the cut based on “global developments” and “muted inflation pressures”. In a press conference after the meeting, Fed Chair Jerome Powell told reporters that “it’s not a long cutting cycle, in other words, referring to what we would do when...

The Fed’s two-day meeting started today. The meeting announcement is scheduled for 2:00 PM EDT Wednesday. Following the announcement, a press briefing by Fed Chair Jerome Powell will take place. I’m afraid there appears to be a near certainty that the Fed will cut the target federal funds rate. As this MarketWatch article describes, the latest inflation news gives the Fed what it needs to justify a rate cut:

At least most analysts are expecting only a 25 bp rate cut at this Fed meeting. The main uncertainty for the meeting...

I’m afraid that it looks very likely that there will be a 25 bp rate cut at next week’s Fed meeting. In a speech last Thursday, the New York Fed President John Williams sounded like he might be pushing for a 50 bp rate cut. According to the Wall Street Journal:

Even though Williams had given similar speeches in the past, the timing of this speech had the markets thinking that he was giving a signal. However, in a rare move, the New York Fed came out and told reporters that...

Today’s speech by Fed Chair Jerome Powell and his Congressional testimony last week have been interpreted by the markets and by many economists that the Fed will likely cut rates at its July 30-31 meeting. In the speech delivered today at a conference in Paris, the Fed Chair essentially repeated what he said last week about his view of a strong U.S. economy with growing risks:

The minutes from the June Fed meeting were released last week, and according to this MarketWatch article, the “minutes just show that Powell has the...