The US rate cut discussion is for now, dead in the water. Trump has been talking about the Fed adjusting policy but the economy is best left alone now. No rate hike, no rate cut……do not touch.
Stocks fell on Wednesday as the Federal Reserve Chairman Jerome Powell said in a news conference that the recently low inflation pressures are likely to be only “transitory” which would imply that there will not be a rate cut anytime soon. There were some investors and even some market analysts who, in March, said that the next move by the Fed could be a rate cut and not a rate hike in the US. The market was pricing in a cut but the Fed Chair indicated differently.
The comments from Powell came after the Fed voted unanimously to maintain the benchmark rate in a range of 2.25% to 2.5% but on the subject of inflation the Fed said that it remained low. The Fed made these comments after the core personal consumption expenditure price index remained unchanged in March and was up 1.6% year over year. This of course is below the 2.0% target set by the central bank. US President Donald Trump urged the Fed to cut rates by 1 percentage point this week because of low inflation. Positive news on trade and reports of a possible trade deal with China – which could be announced next Friday – have been positive for US equity. More on this topic in the coming week.