Prior to the Fed decision, which will be released tonight, I said on television that the US economy doesn’t need a rate cut, however, expectations are too high. What I meant was the Fed members are currently exposed to market and political pressure.
As I’ve mentioned yesterday, the tone of the Fed Chair’s press conference is as important as a rate cut. Statements made so far shows us that the main idea of the Fed’s press release will suggest “taking the necessary measures beforehand to prevent harm”.
Once again, I think there is no reason for a rate cut but expectations became too much to bear that a contrary decision may shatter market calm. A majority of markets has already bought at least a 25 bps cut.
Obviously, a rate cut will cause some raised eyebrows. The Fed should better be ready to answer when people ask, “Why would you cut rates if everything’s going just fine?” Let alone the fact that no Republican Party President in the US history has been able to ensure economic success in their first term, they led the country to face some hard times. Apparently, Trump has broken this vicious circle for the first time in American presidential history. Obama’nın ikinci dönemininin sonunda toparlanmaya başlayan ekonomi, Trump ile beraber azar azar da olsa yükselmeye devam ediyor.
“Trump embarks on electoral investments…”
Obama will go down in history as one of the three Presidents who caused their people to suffer the most from poverty, which was the main cause of Democrats’ defeat in the last Presidential Election. So, as 2020 presidential elections approach, Trump spares no effort to prevent any negative incident which could cause him to lose voters. Continuously stating, “Not good enough but it’s better than nothing” for the last thirty days, Trump has been trying to repress the members of the Fed, who were already having hard to time to make up their minds.
The Fed Chair has a tremendously hard job. Rate cut expectations became so high that the Fed members probably feel like they have no choice but to cut rates at least by 25 bps. But, I do not think that the Fed will let liquidity dry up. It looks like the Fed will enhance the “liquidity constraint and low interest rate” process while narrowing down the scale of Asset Purchase Programs.
