The Fed’s (Federal Reserve) language hints that the central bank can be laying the foundation for an interest rate curb in July or later in 2019, analysts told CNBC. They spoke soon after the FOMC (Federal Open Market Committee) voted as 9–1 to keep the standard rate in a target series of 2.25% to 2.5%, sending the U.S. stocks higher soon in trading. The central bank estimated one or two rate curbs but not till 2020. Nevertheless, the committee during its post-meeting statement removed the word “patient” to state its approach to policy, possibly hinting the central bank can be ready to reduce as soon as July, analysts stated.
John Bellows—Portfolio Manager at Western Asset Management—said, “What you are seeing at the moment is the kind of careful laying the foundation for an alleviating monetary policy. I feel that is as bond and equity is positive. We will see how this works out.” Bellows further added that the Fed is also being careful about appearing to offset trade rule out of the White House. With indications of a slowing financial system and apprehensions about the U.S.-China trade dispute, talk in the markets previously this year on the Fed holding stable for a while has turned out to calls for a curb or even multiple cuts in 2019.
On a similar note, recently, economist stated that meeting between U.S. President Donald Trump and China President Xi Jinping at the G-20 might impact the Fed’s next step. Rob Carnell—Chief Economist and Head of Research (Asia Pacific) at ING—said that the meeting between Trump-Xi at next week’s G-20 summit can sway the Fed at its next meeting. The U.S. central bank maintained interest rates steady and indicated that no curbs were going to happen in 2019.
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