US Federal Reserve hold interest rates unchanged at 4.5%. Now the Fed chair Powell comments on US economy and monetary policy. Fed chair signals 'no hurry' with cutting rates. Here is the breakdown:
Fed chair, Powell
- Running somewhat above 2% goal. Inflation has come down a great deal.
- The economy is in a solid position. 1Q GDP fall reflected an unusual swing in trade.
- The risks of higher unemployment and higher inflation have risen.
- The Current stance of policy leaves us well positioned to respond in a timely way.
- Labor market is not a source of significant inflation pressure.
- Near-term inflation expectations have moved up.
- Survey respondents point to tariffs as driving inflation expectations
- Consumers and businesses report lower sentiment in surveys
- The US administration is doing substantial policy changes.
- Most longer-term measures consistent with 2% goal.
- If large increases in tariffs as announced are sustained, we will see higher inflation and lower employment.
- Tariffs so far are significantly bigger than expected.
- Without price stability, we cannot achieve strong labor conditions.
- Tariffs’ longer-term impact on inflation isn't clear yet.
- If dual mandate goals are in tension, consider distance from goal and time to close gaps.
- Avoiding persistent inflation will depend on size and timing of tariffs, and inflation expectations.
- We'll know more as the White House negotiates tariffs with other nations.
- The costs of waiting are fairly low. Underlying inflation picture is good. When things develop, we can move quickly as appropriate.
- If we see higher inflation, higher unemployment, we won't see further progress toward our goals.
The summary and US100 chart
As for now, Powell sees a huge uncertainty across the US economy, with surging short-term inflation expectations lifted by trade war risk. Also, Powell signals that US economy will slow down if 'trade war' scenario will materialize, while long term inflation measures are close to 2% goal, which may be a signal that the Fed will ease policy if needed. We can assume that the June rate cut may be less possible, as long as large trade deals are not announced yet. The overall reaction of US100 is mixed, futures now losing 0.25%, still below EMA200 resistance zone on D1. However, almost 9% Alphabet (GOOGL.US) sell-off drives a part of that weakness.
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Source: xStation5
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