Federal Open Market Committee (FOMC) is meeting next week amid global concerns surrounding the Sino-US trade war (or currently truce) and a deepening Brexit crisis in Europe.
The Fed consistently and gradually raised interest rates throughout this year and even signaled further hikes for the coming year despite criticism from President Donald Trump.
But fears of an economic slowdown compounded with trade war’s collateral damage in American businesses have already begun to show strong signs of distress in the markets with several main US stocks diving in steep correction movements that erased most of their annual gains last month.
In his latest public appearance at the Economic Club of New York a fortnight ago, Fed Chair Jerome Powell defended his leadership’s interest rate and inflation target policies in the face of Trump’s now more frequent spars with him, without directly addressing the latter’s comments.
Powell said the benchmark interest rate was “just below” neutral, a target the Fed has long aimed for. However, for the first time during his tenure he prompted the markets to slightly adjust their position on whether the bank would insist on sticking to the hikes.
“There is no preset policy path,” Powell said in remarks that was interpreted as a potential slowing down of the planned increases.
“We will be paying very close attention to what incoming economic and financial data are telling us,” he added
As the date of the year’s last two-day meeting, December 18–19, approaches the President once again targeted the central bank over interest rate hikes, describing any further interest raises as a “mistake.”
“Well, I think that would be foolish but what can I say? What can I say? You know, I put a man there. What can I say? If they do that, I’d be disappointed and I think a lot of people would be disappointed,” he said in an interview with Reuters.
“I think he’s trying to do what he thinks is best. I disagree with him — I think he’s a great guy. But, I think he’s trying to get it right but I think he’s being too aggressive, far too aggressive, actually far too aggressive,” he said of Powell.
Trump’s almost passive-aggressive choice of attack showed a resigned posture while at the same time making his point and seeking what he called “accommodation” as Washington has locked itself in commercial battles with other world economies.
But this time around, the Fed might indeed skip a hike given last month’s weak jobs data at 155K although such prospects still remain dim.