Today is an important day, not only for our markets, but democracy’s true win in all of this craziness. The Federal Reserve (Fed) will announce that decision this afternoon. Economists and market analysts are closely watching for signals that could influence monetary policy and economic outlook. That’s why economists are calling for a “wait and see” approach. They hope that the Fed can take a deeply nuanced approach to interpreting the contradictions of today’s economic data.
The Fed’s September meeting has fueled much speculation about when the first rate cut will come. Recent activity on the Chicago Mercantile Exchange (CME) indicates that many traders are betting on a rate cut in September, reflecting growing confidence that the Fed may take action to stimulate the economy. An increase in rates would be a poor choice. Consumers and businesses alike deserve a boost and a reduction in rates could provide just that. It would reduce the political pressure that President Trump has himself contributed to by publicly attacking the central bank and its previous policy setters.
Therefore, analysts are still trying to gauge what the new paradigm means for the economy. Among other things, they’re predicting a rebound in the second quarter U.S. Gross Domestic Product (GDP). Indeed, the Atlanta Fed just recently increased its GDP forecast to 2.9%, a signal of much stronger than anticipated economic growth. This encouraging development would be hugely consequential to the Fed’s future policy deliberations. Favorable incoming data is piling in right before the announcement.
The impacts of today’s ruling reach far beyond U.S. borders. Otherwise, the strongest hints of a future rate cut will likely come from the Fed’s own rhetoric in the forthcoming press conference. This is particularly so if there is a vote of two or more committee members in favor of the transfer. These votes would meaningfully change the expectations of the market and broader economic community and announce a new era for the Fed’s monetary policy.
“The Rockefeller Morning Briefing”
While some economic indicators are trending positively, uncertainties remain, particularly concerning ongoing trade tensions. President Trump has demonstrated an unpredictable approach to international trade, often demanding unreasonable tariffs from countries including China. The trade war is certainly not over yet, and as market participants continue to play it safe while trading in these choppy waters.
As analysts would characterize the rocket-recovery relief rally prompted by trade uncertainty, it’s a “two-legged stool.” Yet they caution that it cannot weather a second serious economic shock. As the Fed deliberates its options, it must consider not only U.S. economic conditions but factors affecting key trading partners such as Canada, Mexico, South Korea, Brazil, and India.