Powell Quick Analysis: The Chair adds 3 additional nails in the dollar's coffin
|- Fed Chair Powell sounds expressed some optimism but added a few more dovish comments.
- This weighs on the US Dollar which has yet to find a bottom.
The Fed signaled no rate hikes in 2019 via its dot plot and announced the upcoming end of the balance sheet. These shifts are part of the five dollar downers. But the Fed was not over with the statement, as Fed Chair Jerome Powell met the press and added a few dovish comments.
While he did express optimism about the economy, he added a few additional dovish comments and pushed the greenback even lower.
1) More balance sheet adjustments
The Fed announced an early end to the balance sheet: ending it in September after tapering down in May. Powell added that further downgrades are possible.
Is he opening the door to an even quicker end of the reduction? Or perhaps even opening a crack for a new QE program? He says the balance sheet will be around 17% of GDP by the end of the year. This means around $3.5 trillion according to the Fed Chair.
2) Long-term shift
The Fed downgraded the Fed's forecasts for growth, inflation, and employment. Powell adds that it may take some time until the economy calls for a change in policy.
This is quite a shift from "the economy is in a good place".
3)Next move in rates
Answering a question about a potential rate cut, Powell says that rates could go one way or the other.. Data is currently not sending signals on which direction rate policy should move
He opens the door to a rate cut. This is going a bit further than the dot-plot, which suggests a hike in 2020.
More: Fed Quick Analysis: 5 Dollar downers and 2 reasons why it could continue even lower
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