The chairman of the federal reserve of Jerome Powell is a tougher of the stubborn side. He does not want to change the Central Bank’s interest rate, unless it really is necessary.
He was very clear in speech in Washington on Friday that he did not think that the reduction of the Fed rate needed. He would rather wait until the next meeting of the Federal Open Market Committee from May 6 to May 7.
💵💰Don’t miss the move: Subscribe to The Straet’s Free Daily Bulletin 💰
“Although the insecurity remains raised, it is now clear that the tariff increase will be significantly higher than expected. The same is likely to be true for economic effects, which will include greater inflation and slower growth,” Powell said at the annual meeting of a business editing and writing company.
It is also true that President Trump wants the Fed to reduce rates now, complaining on Post Friday, Powell was too slow.
Related: veteran funds manager reveals 4 ways in which the market could be a bounce
(It should be noted that Trump also complained of Powell in 2019, wondering who is a bigger enemy, Powell or China President XI Jinping.)
Too much happens?
All that is said, the Fed chief wants clarity before asking FOMC members because so much happens all at once:
- The tariff decisions were bigger than expected, and they may or may not be repaired.
- The economy can weaken very quickly and cause a desolation in financial markets.
- The Government will run out of money to pay its bills in May or June unless it extends the debt debt limit, the Scott Beasent Minister warned that week.
- Possible extension of Trump’s tax reliefs and effects to state debt level.
The question is whether all these problems will show up so big and dangerous that the Fed will be forced to make a transition to footsteps before we think.
The Standard & Poor’s 500 index has lost more than 10% in two days after the Tariff Trump announcement. The Nasdaq composite index is excluded more than 11% in the same two days.
And the latest research of the American Association of Individual Investors (AAII), Bearish Sentiment, defined as a expectation of a drop in shares in the next six months, increased by 9.8% to 61.9% in the last week.
The bear is the third highest ever recorded and the worst of March 5, 2009, when it reached 70.3% in the midst of the unrest of a major financial crisis. .
In the meantime, there are reports of release, signs that consumers are staying on consumption, and business leaders’ complaints that planning the future is impossible.
Costco wholesale (Cost) Little on Thursday, 5.2%was turned off on Friday. Tesla Elon male (Tsla) was excluded 10.4%. Powerful Walmart (WMT) slid more than 4%.
But Powell doesn’t think Fed should act now. Maybe a better word is “more”.
It is a great fear that Tariffs will not achieve the goals of President Trump and dreams of new American prosperity, but will result in a mass retaliation that creates awful global effects that resemble what happened after the United States brought the Smoot-Hawley tariff in 1930.
Fed will enter when you need to
The FED can hold an emergency meeting if things seem to get out of control.
In order to fight the angry inflation in 1979, the Fed led by Paul Volcker agreed to serious measures that so sharply increased interest rates that the mortgage rates had approached 20%.
Under the chairman, Ben Bernanke, Fed pushed rates more to “normalize” them after the dot.com bust and the effects of terrorist attacks on September 11, 2001.
More economic analysis:
- The golden price hit speed of speed; Where is it from here?
- 7 Application of Fed Chairman Jerome Powell
- Retail sale adds a new complication to the forecasts of reduction of FED rates
However, housing rabies produced a huge building, and the mortgage crisis of the subprima appeared as the worst financial debacle from the great depression. Things moved so quickly with so slightly nourished reactions that the CNBC commentator had erupted with their famous “They know nothing!” rant.
Finally, Bernanke and Fed had to come in to try to stabilize the banking system, a task that required 18 months. (Critics still claim that the move was too late and too late.)
The reduction of the rate and other measures that will help the economy to cope with the Coid-19 pandemia, they arrived at an emergency meeting in March 2020.
Related: Veterans Funds Manager issues a warning for 2025