Futures in the United States and Europe dipped and stocks in Asia drifted Thursday as investors found little in minutes from the Federal Reserve's latest meeting to alter expectations for more aggressive interest-rate cuts. Market conditions have grown harsher and data is pointing to lower inflation.
Investment guru Ron Insana says Federal Reserve Chairman Jerome Powell may face a no-win test on Friday when he speaks at the central bank's annual symposium in Jackson Hole, Wyo.
"I think it's quite possible you have a very divided committee", she told Yahoo Finance's "The First Trade". Still, policymakers' verbal commitment to sustain the longest US economic expansion on record, backed up by the recent rate cut, probably made it a bit cheaper for businesses and consumers to borrow this year.
At the same time, several Fed officials didn't see a strong case to cut rates at all given healthy consumer spending and labor market conditions. -China trade war, and convince enough investors that their elusive inflation goal is achievable. QE, or quantitative easing, refers to the Fed buying bonds to support the economy as it did after the 2008 global financial crisis.
The statement reaffirms what Fed Chair Jerome Powell stressed at his press conference last month: that the cut is a "mid-cycle adjustment to policy" and not the start of a rate-slashing cycle.
With economic growth tapering a bit, economists and the market have increasingly priced in the odds of another two rate cuts, 25 basis points each. From a situation of a synchronized global economic recovery in 2018, the world has now moved to one of a global economic slowdown. Beijing's economic health is crucial for global growth.
The July action was approved on an 8-2 vote with Esther George, president of the Fed's Kansas City regional bank, and Eric Rosengren, president of the Boston Fed, dissenting and arguing that they favored no rate cut at all.
Some anxious most about inflation running below their 2% target at a time when they expected it to climb. It showed investors are now predicting a 91% likelihood that the central bank will cut its benchmark rate by a quarter-point next month. This has often been a warning sign of an approaching recession and is widely viewed as an indicator that Fed will have to loosen monetary policy. In Germany, they have a zero interest rate.
Currency markets have been mostly subdued ahead of the Jackson Hole meeting and Fed minutes.
Germany's DAX .GDAXI shrugged off a weak open, to trade 0.1% higher, after Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services sectors, rose to 51.4 in August, above expectations of 50.5. Investors will listen closely for clues as to what steps the Fed might take next.
Fed officials began to more seriously consider rate cuts in early June, after Mr. Trump threatened to escalate trade fights with China and Mexico.
The 10-year US Treasury yield once again fell Tuesday, reversing Monday's rally, and is sitting around 1.5%.
The immediate focus shifts to the minutes of the Fed's most recent meeting, due on Wednesday.
Clearly not everyone is convinced. Bond prices fell, pushing yields higher.
After years of rates being at almost zero, inflation had tended to run modestly below the committee's longer-run goal of 2% in recent years as some indicators of longer-run inflation expectations have stubbornly remained at low levels.