In an interview with CNBC on Friday, The Governor of the Federal Reserve (Fed) Christopher Waller said the Fed is in a position to cut the policy rate as soon as in July, according to Reuters.
Key aspects
“Central banks should ignore the effects of tariffs on inflation.”
“I don’t think the impact of inflation by tariffs is great, the trend looks good.”
“I’m not sure if the committee would agree, but the data is good, unemployment is low, inflation is close to the goal.”
“The Fed has room to reduce rates and then you can see what happens with inflation.”
“The process should start slowly to make sure there are no surprises, if there is a shock the fed could pause.”
“Until now the data has been good, without reason to expect much more to cut.”
“Tariffs should represent a punctual prices effect and not be a persistent impulse for inflation.”
“The Fed has been in pause for six months waiting for an inflationary shock that has not arrived.”
“The labor market is solid, but things like the high unemployment among the newly graduates are beginning to see.”
“There is a decrease in job creation and other things that suggest that the labor market is weakening.”
“The Fed should not wait for the labor market to collapse to cut rates.”
Market reaction
The American dollar index (USD) fell slightly with the immediate reaction to these comments and was last losing 0.15% in the day to 98.63.
These comments received a moderate score of 3.4 from FXSTERET Speechtracker. As a result, FXSTERET FED Fee Index He retreated within the hard line territory, decreasing from 108.84 to 107.23.
Fed Faqs
The monetary policy of the United States is directed by the Federal Reserve (FED). The Fed has two mandates: to achieve prices stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the objective of 2% set by the Federal Reserve, it rises interest rates, increasing the costs of loans throughout the economy. This translates into a strengthening of the US dollar (USD), since it makes the United States a more attractive place for international investors to place their money. When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to foster indebtedness, which weighs on the green ticket.
The Federal Reserve (FED) celebrates eight meetings per year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions. The FOMC is made up of twelve officials of the Federal Reserve: the seven members of the Council of Governors, the president of the Bank of the Federal Reserve of New York and four of the eleven presidents of the regional banks of the Reserve, who exercise their positions for a year in a rotary form.
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non -standard policy measure used during crises or when inflation is extremely low. It was the weapon chosen by the Fed during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy high quality bonds of financial institutions. The one usually weakens the US dollar.
The quantitative hardening (QT) is the inverse process to the QE, for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the bonds that it has in portfolio that they expire, to buy new bonds. It is usually positive for the value of the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
