Federal Reserve Chairman Powell’s first day of his two-day testimony to Congress. Powell was advocating for a rate cut which weighed on both the greenback and US yields. He argued that the jobs report has done little to change the Fed’s outlook and that was essentially taken by the market as a rubber stamp for at least a 25pb cut this month as investors get set of r the U.S. Consumer Price Index due today in New York’s session. The FOMC Minutes did not give anything new to trade from.
“First, he restated the FOMC’s view from the June meeting that the Fed would ‘act as appropriate to sustain the expansion’, and that ‘the case for a somewhat more accommodative monetary policy had strengthened’ for ‘many’ FOMC members. He added that ‘since then (…) it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook’.
As well as reiterating that ‘inflation pressures remain muted’, meanwhile, he gave this a further dovish twist by saying ‘there is a risk that weak inflation will be even more persistent than we currently anticipate’. “
Analysts at ABN Amro explained.
FOMC Minutes and key points
Then came along the FOMC Minutes. Prior to the Minutes. The minutesessentially repeated what Powell already said in his testimony earlier today.
✅ A rate is warranted in the near term.
✅ Could be appropriate if incoming data showed continued deterioration.
✅ Growth and inflation risks are now weighted to the downside.
✅ Many Fed officials saw stronger rate cut case of mid-rising risks.
✅ Many Fed officials in June saw risks weighted to the downside.
✅ No decision was taken at the June FOMC on standing repo facility.
✅ Several officials didn’t yet see a strong rate cut case.
✅ Many officials sought more Fed accommodation warranted near-term.
✅ A few Fed officials saw rate cut risking financial imbalances.
✅ Several officials sought near term cut as a cushion for shocks.
✅ Many saw inflation expectations inconsistent with 2% goal.
✅ Only a couple of Fed policymakers favoured cutting interest rates at June meeting.
✅ Many participants said growth and inflation risks had shifted notably in the weeks ahead of the meeting and were now weighted to the downside.
✅ Officials focused on global risks and discussed at some length salt business investment data from the 2nd quarter.
In other news, the Bank of Canada, as widely as expected, the bank held steady at 1.75% as fully expected but sounded slightly less upbeat on growth where the bank focused on the impact of protectionist trade measures.
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