Fed rates compromise between monetary policy and Trump: Angel Broking

Mr. Jaikishan Parmar (Sr. Equity Research Analyst - BFSI, Angel Broking):

"On Wednesday, the Federal Reserve left rates on hold, but managed to compromise between monetary policy and Donald Trump. In fact Trump had urgently demanded a rate cut. As a compromise, the Fed decided to maintain status quo on rates but opened the floodgates for further rate cuts if warranted by the macro data flows. Within the members of the Fed Policy Committee, there was only one vote (James Bullard) that was strongly in favor of an immediate rate cut. However, the Fed policy statement has also reiterated that the trade war with China was certainly darkening the outlook.

The status quo on rates ensures that the key rate remains in the range of 2.25-2.50% range. However, the Fed Chair, Jerome Powell used two interesting phrases in his statement. For example, he said "Uncertainties about this outlook have increased" and also added that the Fed "will act as appropriate to sustain the expansion." Put together, these two statements can be construed to mean that the Fed remains willing and prepared to cut rates in future. That is certaintly a dovish and expansionary signal.

Wall Street was not too impressed by the shift in language and would have rather preferred an outright rate cut. While US markets were mildly in the positive, markets across Asia have certainly celebrated the decision."

Source : Equity Bulls

Keywords