FRS lowered the rate: consequences and position of other countries
The other day the management made an official statement that the FRS cut the rate by 0.25%, now it is 1.75-2%. This position was explained by Jerome Powell with measures to minimize the impact of existing risks, which include trade conflict and global slowdown in economic growth.
Federal Reserve experts assess the state of the US economy as positive. They note an increase in spending in the capital segment, activity on the part of consumers, a decrease in the unemployment rate.
Lower interest rates indicate that the monetary policy is about to be revised in the nearest future, which was introduced earlier. This can be seen from the optimistic statistics. Federal Reserve specialists conducted a large-scale analysis, which showed the number of issued construction permits, it was a record for 12 years. In addition, the results of the industrial sector, where there is a high level of activity, were presented. This is confirmed by the results of trading on financial markets, where the S&P500 index grew by 0.03%, compensating for losses by 1%.
Despite the positive forecasts, there are problems within the FRS itself. Among the 10 members who voted in favor of changing the rate, three did not share the majority opinion. Two people voted against the adjustments, one wanted a 50 point cut. There was also inconsistency in the report, many sections were controversial and the FRS future course was not fully understood. One of the reasons for this situation is the uncertainty in solving the trade conflict between the US and China.
The opinion of the Federal Reserve system influences the trends and policies of central banks of different countries. A vivid example of this is the statement of the Bank of Japan, which decided not to change the rate of monetary policy. Such processes have affected the stock market performance. There was an increase in the value of bonds, the stock quotations increased.
The next step, which will shed light on the future prospects of the world economy, will be the meeting of the Swiss National Bank and the Bank of Great Britain. The position of these reputable financial institutions is not yet clear. In case they do not want to carry out monetary easing processes, some fluctuations may start on stock markets. Though such a situation will be far from panic, and quotations and main indexes will be affected insignificantly.
Foreign exchange markets deserve special attention. USDJPY has already fallen by 0.5% after the Bank of Japan announced. Now EURUSD is fluctuating within 1.1000, and the indicators have been practically unchanged for 2 weeks. GBPUSD is keeping the level at 1.2500, but with an upward trend. The currency rates of other developing countries are slightly increasing. The Australian dollar and the renminbi have not changed yet. The decline is observed in the international logistics company FedEx. For the first time in 10 years the volumes of their revenues reached the minimum values.