Because the Fed’s tools does not prevent entirely flawed. The rate cut is no surprise that a recession Crown

(Committee Bloomberg) – The Federal Reserve’s strategy placed the crown of the outbreak and its impact on financial markets and to fight to be nothing less than shock and awe the longest US economic growth in history. unanimously to lower the fed funds rate by 50 basis points in the first emergency measures taken by the central bank since 2008, Chairman Jerome Powell and other Fed officials immediately to a range of 1% to 1.25%. The surprise was not necessarily the amount of movement: Bank of America Corp., Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co. and NatWest Markets were just some of the Fed’s primary distributor, who was expecting a half point because the rapid decline in yields of US Treasury last week moving at or before the decision to March 18 the central bank, in no small part. Rather, the shock how crucial chose to react after the Fed signals only a few days before some ‘urgent. Since I have a number of central banks has recently written the parrot line was that it was too early to assess the economic consequences of the spreading crown. The first question asked by Powell at his press conference on Tuesday was: “What has changed” He could not really answer, unlike subscribe to our “we wanted to see a risk for the outlook for the economy and act.” daily newsletter crown by posting this link, and you have tips, leads and [email protected] stories. “Do not you see that show things to real data,” he said. “You see them in the mood prognostic indicators and shows similar. We expect that to continue, it is likely to grow. And this is one of the reasons why you come to the conclusion that it would be useful for us today to spend to support the economy, and it is what we did. ” But now Citigroup Inc. United States -economica Surprise Index near its highest level in over two years. And ‘certainly reasonable to come some data to expect weaker in the coming months, but the bar that policy makers last week had put erased by any measure. In fact, the Fed said in its statement reiterated that the “fundamentals of the US economy remain strong.” So what explains the sudden move? Probably because I, the Fed has theorized on Monday provides coverage for the participants, not to ease monetary policy much space as the European Central Bank and the Bank of Japan. Surprisingly, the ECB’s next decision is March 12 – six days before the Fed. My Bloomberg opinion colleague Ferdinando Giugliano wrote on Tuesday that “the ECB to be careful, make sure it does not fail to recall an old reputation crisis was like a big central bank that is willing to trade the least. ” The fact that a great risk of the ECB was the first to be (the next decision of the BOJ’s March 19). There is now much less pressure on President Christine Lagarde. Group of finance ministers and central bankers are seven not to say outright, of course. Powell said only that central bankers speak to each other on an ongoing basis. “But retailers can read between the lines.” G-7 central banks will meet their positions, so that the stability and support growth economic, while the resilience of the financial system, “the G-7, driving in a statement. Even after the big rate cut stocks fell, while Treasury yields slightly fell to session lows. 10 years performance Treasury fell 13 basis points to 1.03%, close to a record low, while two-year yields fell 16 basis points to 0.74%. the strength members already knew what the markets: Looser monetary policy is not is perfect, preventive care for a possible pandemic. Bloomberg News Katherine Greifeld and Vildana Hajric wrote an article on Monday entitled “the problem with pinning All your market focuses on interest rate cuts”, which surveyed investors ch and they were skeptical that the risk of movements of Fed action would be short-lived. “The markets will stop panicking when policymakers start to panic. The Fed delivered just an emergency stop, as a qualified panic,” wrote Neil Dutta, head of US economic research at Renaissance Macro Research. “But the Fed’s tools are imperfect and insufficient to deal with a public health crisis. The market wants to know how far spread of the virus and the Fed can not answer that question.” Powell also managed the inevitable impression that he and other political leaders are vulnerable to political pressure. “The lightness and the average speed of large should.” President Donald Trump tweeted this morning that the Fed just for good measure, he added that the “Federal Reserve Jerome Powell led the call incorrectly from the start. Sad!” After the Fed announced that the interest was lower, Trump kept his online campaign marches, demanding “more easing and cut” cuts the Federal Reserve, but must continue to facilitate and, more importantly, is in line with others. we are not countries / competitors playing on a piano is not just us is finally time to bring the Federal Reserve more easing, cutting -…! Donald J. Trump (@realDonaldTrump) 3 March 2020 This is exactly what I think of bond traders over the next. is this step, any type of action on March actual decision by the Fed to replace or Powell will go with another rate cut in sight? bp was “in line 50 mit Schock and Ehrfurcht’als Operating topic” Ian Lyngen, BMO Capital Markets wrote. “happening now, what with the FOMC meeting on March 18? he has the lock to a different potential Fed cut then? Powell does not hope, but the probability investors greasy rschiedlich skew if history is a guide. “the Fed released just a lot of ammunition in an attempt to shock and awe the global financial markets. This could only be the first step in the direction of US interest rates in the lower zero limit back
Photo copyright Jacquelyn Martin -. AP