The risks cited in July have not abated in September, so many have concluded it’s not too far-out to assume this signals another rate cut.Economist and Fed-watcher Tim Duy agrees — and he thinks the cuts won’t end in September, either. So all eyes were on this month’s meeting, in which Fed members projected a 6.5% drop in the country’s GDP, inflation at 0.8% and the unemployment rate to settle around 9.3% by the year’s end.This, of course, paints a dramatically different picture than the Fed presented at the end of last year, when it predicted 2% growth in GDP, 1.9% inflation and 3.5% unemployment.The decline in GDP in the second quarter alone is expected to be the worst on record, according to Fed Chair Jerome Powell.Despite the troubling numbers, the Fed’s outlook provides at least some hope that the economy will recover meaningfully by the year’s end. “There are special factors that suggest the economy could reaccelerate,” he says. In its July post-meeting statement, the FOMC stated again that it won’t make any changes until it is “confident that the economy has weathered recent events.”Unfortunately, it may be some time before we meet that milestone. Despite continuing softness in exports and manufacturing and business fixed investment, the economy continues to grow at a moderate rate.The SEP downgraded its federal funds rate projection. That’s the view from Wall Street.Economists for leading financial firms expect the U.S. central bank to follow up The reasoning is not that the Fed is trying to hold the stock market’s hand. Still, he maintained that “the data are not currently sending a signal that we need to move in one direction or another.” He also remarked that since it’s still early in the year, they have limited and mixed data to consult.Kapfidze offers a more concretely positive outlook, noting that the chances of a rate cut are pretty slim. Tweet. I’d be surprised if it happens before September.”Kapfidze predicts we’ll see another downgraded SEP forecast. FOIA The FOMC makes an annual report pursuant to the Freedom of Information Act. Picture taken February 2, 2020. ).Be sure you do understand the full terms provided by the financial institution before signing the dotted line, or lets be real, clicking the "I Agree" button.We do our best to make sure our calculations are up-to-date, but we are human and can't make warranties regarding the accuracy of our information. “In other cycles, the Fed wound up raising rates again after a mid-cycle adjustment,” he countered, quickly adding, however, that “I’m not predicting that.” Still, he leaves it open to the possibility of future rate hikes after this cut, rather than an overall downward turn.Note that there is practically zero chance of a rate cut at the upcoming June meeting. And what they see is growing likelihood of a negative shock, Alexander said. He points to the already strong labor market as a plus.When asked about this potential rate cut, Fed Chair Jerome Powell emphasized the Committee’s current positive outlook, while also emphasizing that it remains mindful of potential risks. Most notably, the coronavirus has become an economic cause for concern, one that Powell identified early on in his post-meeting press conference statement as one of a few uncertainties.“The situation is really in its early stages,” Powell commented. “In fact, it could have been more of an obstacle to clear communication than a help.”Powell expects the Fed to be back on their regular quarterly cycle again in June.As for the outlook, the FOMC’s insight can only stretch so far.
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Each meeting date is tentative until confirmed at the meeting immediately preceding it.20th Street and Constitution Avenue N.W., Washington, DC 20551 This means a hike announcement would be much more likely during the FOMC’s March 19-20 meeting, rather than in January.Perhaps more importantly, Kapfidze said there’s been too much market flux for the FOMC to make a new decision on the federal funds rate. Recall the comments that Fed Chair Jerome Powell made at the October meeting, when he said the Committee would only change the direction of monetary policy if they could see any real reasons to do so in the economic outlook.Overall, the Fed’s outlook for the U.S. economy remains positive, pointing to a strong labor market, solid job gains, low unemployment rate and solid consumer confidence. The high degree of leverage can work against you as well as for you.
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