Bank Deals Blog: Fed / Banking News

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...

The June jobs report that was released last Friday wasn’t strong enough to convince the Fed to forget about a rate cut at its next meeting (July 30-31). However, it was strong enough to pretty much end talk of a 50-bps rate cut. On Thursday, the Department of Labor will be releasing the Consumer Price Index for June. The consensus is for a flat CPI with a rise of 0.2% in core CPI. If the inflation data meets or is below consensus, that will strengthen the case for a 25-bps...

The odds are very high that there will be a rate cut at the Fed’s next meeting on July 30-31. Articles such as this one by Bloomberg are not discussing the question of whether there’s going to be a rate cut, but whether the cut will be 25 or 50 basis points.

To avoid a rate cut, the economic news will need to be very favorable this month. The recent trade thaw with China is a step in the right direction. This Friday (July 5th) is an important date for the...

Even though the Fed didn’t cut rates last week, it did open the door to rate cuts for its next meeting (July 30-31) by removing its “patient” verbiage. Now, the Fed says they’re prepared to “act as appropriate” which is being interpreted to mean that they are preparing to cut rates.

After the meeting, the Fed released an updated summary of economic projections (SEP) which includes the federal funds rate “dot plot.” That new dot plot showed that many FOMC participants are thinking that rate cuts will be necessary in 2019....

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, 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. No rate change is expected at this Fed meeting. The “pause” period that began earlier this year will likely continue.

It should be noted that a Fed rate cut...

The disappointing May jobs report that was released Friday has increased the odds of a Fed rate cut. It still seems unlikely that the Fed will cut rates at its meeting next week (June 18-19). If the Fed thinks that the economy is starting to weaken, it will probably first change the language in the post-meeting statement to suggest that they are no longer planning to be patient. Instead, they may include language similar to what Fed Chair Jerome Powell stated in a speech last week. At the start of...

Until today, Treasury yields had five straight days of decline. Trade tensions appear to be the primary driver of this decline. This yield trend finally ended today due to reduced trade tensions and due to a speech by Fed Chair Jerome Powell which appeared to open the door to a Fed rate cut in 2019. The speech was the opening remarks at the "Conference on Monetary Policy Strategy, Tools, and Communications Practices.” Fed Chair Powell started off the speech with some comments about recent developments. This is the relevant...

Last week the minutes from the April 30/May 1 FOMC meeting were released. The minutes showed that the majority of the FOMC participants are optimistic about the economy in 2019:

A few of the participants are less optimistic, but the minutes didn’t note any participants that expressed concern about a significant slowdown in 2019:

The view that low inflation is only temporary continues to be the view held by the majority in the FOMC, but the combination of low inflation and solid economic growth is keeping the Fed content on maintaining...

Fears of a trade war and its impact to the economy continue to worry the markets. The latest concerns about the effects of a trade war were published by analysts at Morgan Stanley. According to this Reuters article, the analysts warned that a “collapse of U.S.-China trade talks and hike in tariffs on Chinese goods would push the world economy toward recession and see the Federal Reserve cut U.S. interest rates back to zero within a year.” The tariffs could also increase prices which would push up inflation, but based...

Growing concerns about the economic impact of a trade war along with additional weak inflation data have driven down Treasury yields and raised the odds of a Fed rate cut for later this year. Boston Fed President Eric Rosengren said the following in a recent interview with Reuters:

In addition to the risk from the tariffs, inflation data continues to be weak. On Friday, the Labor Department released April CPI data. Core CPI rose 0.1%, which was below the consensus of 0.2%. The Fed has maintained that low inflation data is...