Powell validates expectations for more rate cuts - ABN AMRO


According to Bill Diviney, Senior Economist at ABN AMRO, the Fed Chair Jerome Powell's speech at Jackson Hole on Friday reinforced dovish expectations that the central bank will cut rates 25bp at each of the remaining three meetings in 2019.

Key quotes:

“In a speech charting the historical evolution of monetary policy at Jackson Hole, Fed Chair Powell spoke again of the challenges the Fed faces from uncertain estimates of u* (the natural rate of unemployment) and r* (the neutral rate of interest), alongside the ‘new challenge’ of fitting trade policy uncertainty into its framework. The key part of the speech for us in its implications for near-term policy was his acknowledgement that the current favourable economic outlook is (partly) explained by ‘the shifts in the anticipated path of policy [that] have eased financial conditions’. OIS forwards currently price in four further rate cuts over the coming twelve months, and this part of his speech provides tacit endorsement of such pricing. The market reaction to the speech was correspondingly muted.”
 
“All told, Powell’s speech supports our view that the Fed will cut rates 25bp at each of the three remaining FOMC meetings this year, pausing after December to assess the lagged effects of the stimulus. While consumption in the US remains solid for the time being, the manufacturing sector is weak and is likely to weaken further. Given the continued escalation of the trade war, there is little prospect manufacturing will turn around in the near future, and this will ultimately hit jobs growth and consumption. At the same time, muted inflation gives the Fed ample leeway to ease policy, given the downside risks to the outlook.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: bears pressuring, 1.0980 critical support

Risk aversion took over the FX board on Friday, weighing on high-yielding assets. The EUR/USD pair, finished the week just a handful of pips above the 1.1000 figure amid mounting tensions between the US and China.

EUR/USD News

GBP/USD: at risk of losing more ground in the short-term

The GBP/USD pair advanced up to 1.2581, it highest in over two months, but was unable to sustain gains, ending the week around 1.2470. Cable could keep losing ground on a break below 1.2460, the immediate support.

GBP/USD News

USD/JPY: at a bring of breaking lower

Fresh risk-off flows resulted in the USD/JPY pair trimming weekly gains on Friday, ending the week at 107.55. The pair barely holding above a critical Fibonacci support at 107.45. Japan’s National inflation steady at lows in August.

USD/JPY News

Gold climbs further beyond $1500 mark, lacks follow-through

Gold edged higher for the second consecutive session on Friday, albeit remained well within a familiar trading range held over the past two weeks or so.

Gold News

Top 3 price prediction Bitcoin, Ripple, Ethereum: Ethereum points to the Moon as Bitcoin takes a break

ETH/USD exceeds $220 and is bidding to lead the market. Bitcoin sets a bear trap and recaptures $10,000. XRP stalls between technical levels and fails to consolidate $0.30.

Read more

Forex MAJORS

Cryptocurrencies

Signatures