Thomas Franck, Sam Meredith
The Federal Reserve on Tuesday began its two-day policy meeting that is widely expected to result in the central bank cutting the benchmark overnight lending rate by 25 basis points. But while investors have largely priced in an interest rate reduction, markets will likely move on how Chairman Jerome Powell characterizes the economic situation in the U.S.
Powell may be inclined to signal that no further rate cuts are needed if he feels that the macroeconomic headwinds haven’t dampened growth as much as feared.
“As I have mentioned before, as of July, we are experiencing the longest economic expansion in history, even though it has taken quite a few punches in the last few months,” Kevin Giddis, head of fixed income capital markets at Raymond James.
“Punches from the tariffs, punches from a mixed Fed policy, and punches from a divided Congress,” he continued. “If the economy does make a comeback, it would ‘fly in the face’ of what was a certain recession?”
President Donald Trump said Monday that he expected to sign a significant part of the trade deal with China ahead of schedule. The prospect of Washington extending certain tariff exclusions on $34 billion worth of Chinese imports also boosted market sentiment.
The U.S. and China secured a limited trade deal earlier this month, in an attempt to end a protracted dispute that has battered financial markets and hammered global growth.