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“Transitory” Replaces “Patience” The New Fed Keyword

20 Years ago | May 05, 2019 12/2/23, 12:00 AM

John M. Bland, MBA, co-founder,

Fed Sends New Signals To The markets Financial Markets were not set up for the latest signals sent from the latest FOMC meeting on Wednesday April 1. Dealers walked away from the press conference and policy statement saying that Fed Chair Powell had been mildly hawkish. Following several speeches by top officials from the central banks, traders had been expecting a dovish message. The bank announced a “technical” 5bp cut in IOER (interest on excess reserves) to enhance their control of the Fed Funds Rate. Chair Powell emphasized their had been no policy implications relative to the cut. Many were disappointed that the Fed had nothing to say about the possibility of “insurance cuts” if they were needed. Powell also dismissed the recent softness in inflation data as probably transitory. In short there were no signals that a cut in U.S. is not in the cards for the immediate future. Presumably, the Fed would be prepared to act should their core inflation measures remain soft, especially with key economic data in major national counterparts remaining weak.

Financial Markets Had Another rough Session Wednesday Markets generally appeared to be set up for a dovish Fed on Wednesday and were blindsided by the hawkish posture of the central bank. Most were expecting interest rates to ease and the USD to weaken. By the end of the day, bond yields had risen and the USD was higher. Equities fell as well. The introduction to the Fed policy indicated a slight bias shift in the FOMC since March. They said the labor market remains strong and that economic activity rose at a solid rate.and Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.” This viewpoint could go a long way to explain why policy is now on hold.

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 6 May 2019
AA GB- Holiday
A all day Final Service PMIs
Tue 7 May 2019
AA 04:30 AU- RBA Decision
A 14:00 US- Jolts
A 20:00 NZ- RBNZ Decision
Wed 8 May 2019
A 16:00 US- EIA Crude
Thu 9 May 2019
A 12:30 US/CA- Trade
A 12:30 US- Weekly Jobless
AA 12:30 US- PPI
Fri 10 Apr 2019
AA 08:30 UK- Trade/Output/GDP
AA 12:30 CA- CPI 

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