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The Fed did not help the economy today

T Federal Reserve has almost got it right today in its decision on interest rates and its explanations. Helaas, de twee fouten die het hebben gemaakt, hebben het effect van slecht roillen op de aandelenmarkten in de directe aftermath. In the long run, the Fed's actions and statements today will have a negligible effect on markets and on the real economy. De markeder vil sandsynligvis fortsætte med at tabe eller at holde sig bedst i et holdings mønster. Men den manglende rally vil skyldes ikke-Fed-relaterede grunde, som for eksempel handelskrige og en mulig gældskrise. Det kommer ikke være på grund av yderligere fears of rent hikes. Going into the meeting, I thought the proper move was to raise rates by a quarter point, as expected, and to pronounce the outlook going forward to be completely neutral and dependent on data. That way, its small rate hike would signal to anti-inflation hawks that it will not be back down to anti-rate hike from President Trump. Men den flytning fra forventede hikes i 201 9 ned til "neutral" ville have reassured de investorer, der er bizarrely spooked ved enhver rate hike at all. Instead, the Fed did indeed implement the expected hike – good – but it only moved its forward looking outlook closer two neutral, rather than completely neutral. Indeed, the Fed's official statement never even used the word "neutral" at all. Instead, it said it was expected "some" additional "gradual increases" in interest rates in 2019, although perhaps not as…

T Federal Reserve has almost got it right today in its decision on interest rates and its explanations. Helaas, de twee fouten die het hebben gemaakt, hebben het effect van slecht roillen op de aandelenmarkten in de directe aftermath.

In the long run, the Fed’s actions and statements today will have a negligible effect on markets and on the real economy. De markeder vil sandsynligvis fortsætte med at tabe eller at holde sig bedst i et holdings mønster. Men den manglende rally vil skyldes ikke-Fed-relaterede grunde, som for eksempel handelskrige og en mulig gældskrise. Det kommer ikke være på grund av yderligere fears of rent hikes.

Going into the meeting, I thought the proper move was to raise rates by a quarter point, as expected, and to pronounce the outlook going forward to be completely neutral and dependent on data. That way, its small rate hike would signal to anti-inflation hawks that it will not be back down to anti-rate hike from President Trump. Men den flytning fra forventede hikes i 201

9 ned til “neutral” ville have reassured de investorer, der er bizarrely spooked ved enhver rate hike at all.

Instead, the Fed did indeed implement the expected hike – good – but it only moved its forward looking outlook closer two neutral, rather than completely neutral. Indeed, the Fed’s official statement never even used the word “neutral” at all. Instead, it said it was expected “some” additional “gradual increases” in interest rates in 2019, although perhaps not as many as it expected before.

These tiny verbal signals always have an outsize effect on jittery investors, especially in the short term. Those like President Trump, who hate any rate hikes at all, were not mollified. They began driving “sell” orders.

In the long run, though, benchmark interest rates at 2.5 percent are not high by historical standards. Investors will get used to them, and will eventually take more solace than they did today in appreciating that the Fed’s posture toward further rate hikes is now less aggressive than before.

To the extent that the Fed can keep the economy on the go, its new posture should work reasonably well. Alas, die andere economische factoren, namelijk handel en schuld, die grotendeels uit de Fed’s controle zouden kunnen zijn, hebben rippleffecten over de economie in 2019.

Maar waar de Fed’s beslissing en officiële verklaring slechts een beetje af waren, voorzitter Jerome Powell’s press conference afterwards was a mess. He rambled too much and, in doing so, he used language that sometimes scared inflation hawks and sometimes scared the interest rate doves who oppose them. Both sides heard phrases that made them nervous, and the more Powell talked, the more the markets dropped. Partway through his press conference, the Dow Jones Industrial Average was down only about 50 points for the day; fifteen minutes later, it was down more than 400. It eventually closed down 352.

The Dow Jones is not necessarily the economy as a whole, and vice versa. In the long run, the effect of Powell’s remarks will be washed out by events in the real economy. Likevel, i den grad, som ikke er uvæsentligt, at markedet jitters selv påvirker den reelle økonomi, Powells bidrag til disse jitters gjorde det i det mindste marginalt mere sandsynligt, at den reale økonomi vil lide.

In plain English, the Fed and its chairman today needed to reassure everybody. Instead, they reassured nobody. De har bare lagt til en fortsat følelse af usikkerhed. Deres performance today may have been technically sound in terms of pure economics. But Powell left investors still peering into their various “Closets of Anxieties,” still prone to nervously running for cover.

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