{"id":155692,"date":"2019-09-19T09:58:18","date_gmt":"2019-09-19T13:58:18","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=155692"},"modified":"2019-09-19T07:59:41","modified_gmt":"2019-09-19T11:59:41","slug":"federal-reserve-didnt-surrender-to-white-house-pressure","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/09\/federal-reserve-didnt-surrender-to-white-house-pressure\/","title":{"rendered":"Federal Reserve didn\u2019t surrender to White House pressure"},"content":{"rendered":"
September 19, 2019<\/div>
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By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime<\/a><\/strong><\/p>\n

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Fed\u2019s hawkish cut supports the Dollar
\nUS monetary policymakers deeply divided
\nMarkets still believe further rate cuts are on the way<\/em><\/p>\n

The Federal Reserve cut its main target interest rate for the second time in 2019. The 25-basis point cut to a range of 1.75% to 2% was widely anticipated by markets. However, this didn\u2019t move the Dollar lower as the FOMC statement and economic projections made it clear that this move is only a mid-cycle adjustment and not part of a prolonged quantitative easing cycle. Fed Chair Jerome Powell seemed consistent with his views of an \u2018insurance rate\u2019 cut which some market participants didn\u2019t like.<\/p>\n

The Fed policymakers were deeply divided in their views. Looking into the dot plot, five members favoured keeping rates unchanged, five approved of rates being cut by 25 basis points but then keeping rates unchanged for the rest of 2019, while seven members expect one more rate cut by year-end. Of course, the main dissenter was not a Fed member, but President Trump who was watching the decision closely and immediately tweeted \u201cJay Powell and the Federal Reserve Fail Again. No \u2018guts\u2019, no sense, no vision!\u00a0 A terrible communicator!\u201d<\/p>\n

That level of disagreement between monetary policymakers will make it difficult for market participants to predict where interest rates are heading next. Markets also seem to disagree with the Fed about the path of interest rates. The dot plot shows interest rates will have a floor at 1.5%, but looking into the CME\u2019s Fed Watch tool speculators expect a 46% possibility that interest rates will be below 1.5% by April 2020. In simple terms, the Fed believes the economy will continue to grow at a moderate pace, but markets believe that there is a significant probability of a recession.<\/p>\n

Interestingly, Google Trends show that the search for the term \u2018recession\u2019 spiked in August to the highest level since the 2008 financial crisis but has abated since then. That\u2019s despite US unemployment being near record lows and consumer spending remaining high. Psychology has a tremendous impact on the way consumers behave. The more they hear the term recession the more they will think about it and the less likely they are to spend in the future. In my opinion, this behavioural concept is riskier than trade wars, inverted yield curves, or any other economic metric we\u2019ve seen lately. If investors want to know what\u2019s next for monetary policy they should keep watching consumer behaviour.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

Disclaimer: <\/strong>The content in this article comprises personal opinions and should not be construed as containing personal and\/or other investment advice and\/or an offer of and\/or solicitation for any transactions in financial instruments and\/or a guarantee and\/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.<\/em><\/p>\n<\/div>\n

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\"Forex-Time-Logo\"Article by ForexTime<\/a><\/span><\/strong><\/p>\n

ForexTime Ltd (FXTM)<\/strong> is an award winning international online forex broker regulated by CySEC 185\/12 www.forextime.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime Fed\u2019s hawkish cut supports the Dollar US monetary policymakers deeply divided Markets still believe further rate cuts are on the way The Federal Reserve cut its main target interest rate for the second time in 2019. The 25-basis point cut to a range of 1.75% […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-155692","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/155692","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=155692"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/155692\/revisions"}],"predecessor-version":[{"id":155725,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/155692\/revisions\/155725"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=155692"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=155692"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=155692"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}