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AUTHOR: Jason J. Roque, CFP®, APMA®
TITLE: Investment Adviser Rep – CCO TAGS: TRADE, FRB, INTEREST RATES |
The Federal Reserve Board (FRB) delivered on easy monetary policy, but not on a future of easing policy. Is this enough to cause a tailspin in the economy?
Economic Data
Manufacturing data across much of the developed world is sitting under 50. Above 50 is an indication of expansionary conditions while under 50, reflects contractionary conditions. Germany, France, Italy, The UK, Russia, China, and Japan all showed contractionary manufacturing in the last month. The US is alone in expansionary territory. As the trade war persists, the likelihood of the US avoiding being dragged into contraction is unlikely.
Policy Moves
The FRB delivered a rate cut last week. However, they also indicated that this was a single adjustment to rates rather than a lengthy cutting cycle. Markets responded to the hawkish rate cut by falling across the globe. The US, additionally, announced that tariffs will be levied against $300B in goods from China come September 1st. This was in response to an underwhelming meeting early in the week between the two nations.
Conclusion
With economic weakness across the globe, it is not likely that the FRB’s intended single cut will remain one cut. In addition to that statement, the FRB also indicated that future rate decisions will be data dependent. Should economic weakness persist, the FRB would likely cut rates again.
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