While testifying testimony before the House Financial Services Committee on Tuesday, Jerome Powell, Chairman of the Federal Reserve System, said there was very little demand for loans below $1 million in the Main Street Lending Program.
US stocks rejoiced and snapped a four-day losing streak after the Fed Chair affirmed the ‘Powell Put’, noting that further fiscal and monetary stimulus will be needed for the economy. Treasury Secretary Mnuchin said the next stimulus needed should help travel and restaurants, also offering that the unused Fed facility money could be used for smaller businesses.
The Federal Reserve adopted a new inflation policy that that will permit price increases above the 2% target for extended periods if necessary to balance periods of weak performance. A product of the much discussed Monetary Policy Review, which has been more than a year in the making, the change reflects the bank’s experience with inflation and unemployment since the financial crisis.
The FOMC Minutes of July meeting showed on Wednesday that members continued the review of the monetary policy strategy, discussing potential changes to the statement of longer-run goals. The FOMC further noted that participants agreed that refining the statement was warranted in light of "fundamental changes" in the economy over the past decade.
The FOMC on Wednesday announced that it left the benchmark interest rate, the target range for federal funds, unchanged at 0%-0.25% as widely expected. In its policy statement, the Fed reiterated that it is committed to using its full range of tools to support the US economy and noted that the path of the economy will depend on the course of the coronavirus outbreak.
Read my dot-plot, no new rate hikes – that is the message from the Federal Reserve. The new projections are pointing to low chances of higher borrowing costs in 2023, certainly not beforehand. That is merely a repeat of the previous messages by the Fed, as published in June. The accompanying statement has undergone a change, committing to an average inflation target – yet that is also unsurprising given the dovish policy shift that Federal Reserve Chairman Jerome Powell delivered in late August.
Reality bites – and the Federal Reserve has been unable to ignore it. The resurgence of coronavirus is already evident in jobless claims and consumer confidence figures – and the Fed probably has the Gross Domestic Product figures for the second quarter, reflecting the first wave's damage.
The bank has your back – that is the message from the Fed to investors. There are no signs of Fed fatigue – the commitment to support the economy remains strong and should boost stocks while dollar printing will likely keep the dollar down.
The Federal Reserve finally put numbers to the events and policies of the past three months issuing its delayed projection materials, forecasting that the US economy will contract 6.5% this year and unemployment will be 9.3% in December.
At yesterday's FOMC meeting minutes we saw that the Fed had been concerned about the unemployment picture. Jerome Powell has previously stated that unemployment in the US could hit 25%. The minutes from April's rate setting meeting also showed there is deep concern not just about the current state of the economy, but also what lies ahead.
The dollar has been gaining since Fed minutes dismissed the idea of negative US interest rates. Demand for the dollar has been bolstered by cooling market sentiment. The minutes are little stale since we've just heard fresher comments from Fed Chair Jerome Powell in his testimony to Congress this week.
AUD/USD refreshes two-month lows near 0.7050, having stalled its bounce around 0.7075 region. The US dollar appears to have regained poise amid tepid market mood. The focus is now on whether the US dollar gives back some ground ahead of US data, Powell Day 3.
Gold prices have deteriorated in the US dollar's relentless comeback as investors move away from stocks. The price of the dollar is correlated to gold, so it stands to reason that if the dollar is about to tail off its gains, then gold should find reprieve.
Investors continued to sell euros on Wednesday, driving the currency to its weakest level since July. Europe’s greatest fear is materializing with the number of coronavirus cases exceeding 5 million. As we indicated at the start of the week, stricter restrictions are on their way.
USD/JPY is stalling at market structure and bears and looking for opportunity to the downside. Bulls might have some upside to go yet, but the air will be getting thinner in those heights.
WTI fades the drop to sub-$39.30 levels for the third consecutive day. The repeated bear failure may entice buyers and yield a bounce. However, Sept. 18 high remains a level to beat for the bulls.
With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks.
In the US, the Board of Governors of the Federal Reserve (FED) meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency.
If rates remain unchanged, attention and also main news and analysis turn to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.
The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
Fed official website, on Twitter and Facebook
Jerome Powell
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31,
2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury
under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
Jerome Powell Fed's Profile and Wikipedia
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
