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Fed Officials Signal Quarter-Point Rate Cut

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

Amid the confusion created by jawboning regional Fed Presidents, it seems that The Fed has zeroed-in on a 25 basis point rate cut at the next FOMC meeting. As the Fed Funds Target rate is ABOVE the US Treasury 10-year yield, one measure of the US Treasury yield curve.

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Federal Reserve officials signaled they are ready to lower interest rates by a quarter-percentage point later this month, while indicating the potential for additional reductions, despite the recent surge in market expectations of a half-point cut.

Officials aren’t prepared for bolder action now, according to the officials’ recent public statements and interviews, as they weigh concerns about a slowdown in global growth, an increase in trade-policy uncertainty and a pullback in inflation.

The larger cut appears unlikely for now because officials have said recent economic developments haven’t signaled an imminent downturn.

Fed Chairman Jerome Powell set the stage last week for the first interest rate cut in over a decade during congressional testimony, when he signaled concern about global growth and the risk of a more prolonged shortfall in inflation from the Fed’s 2% target. Those developments strengthened the case for a somewhat easier policy stance, he said.

Federal Reserve Chairman Jerome Powell.

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It seems that US 30-year mortgage rates are destined to continue declining as the 10-year T-note yield is LOWER than The Fed Funds Target Rate (upper bound).

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President Trump’s reaction to “only” a 25 basis point rate cut.

 

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