Investors Eyeing Powell, US Consumer Inflation Data

Investors Eyeing Powell, US Consumer Inflation Data”

Federal Reserve Chairman Jerome Powell signaled to Congress Wednesday that the central bank is prepared to cut interest rates as soon as this month, even with an improved US job market and a less contentious trade battle with China.

"We're learning that interest rates - that the neutral interest rate - is lower than we had thought and I think we're learning that the natural rate of unemployment is lower than we thought", he said. That's to say that markets feel that if Fed rate cuts are coming, they're going to come quickly over the next several months, a direct response to the growing threat of the US-China trade war.

Fed staff concluded the rise in world tariffs had a likely "material" impact on the slowdown in global trade a year ago, and that "uncertainty surrounding trade policy could be leading firms to delay investment decisions and reduce capital expenditures".

But according to Reuters, the signs of a pick-up in underlying inflation could temper "financial market expectations of a 50 basis point cut at the end of the month and views that the Fed would lower borrowing costs at least twice this year".

Asked about Trump's threats on Wednesday, Powell repeated what he has said before that he has a four-year term as chairman and intends to serve the full term. Food consumed at home fell 0.2% amid declines in the prices for beef, fish, eggs, cereals and fruit and vegetables. "We're not surprised to see the front-end well bid".

Sorry, Florida. There's a better place to retire: Sorry, Florida. Many investors have put the odds of a rate cut this month at 100%.

But inflation remains tame over the past year, with the CPI slowing to 1.6 percent compared to June 2018, two tenths of a point lower than in May and the second straight year-on-year decline. Clothing prices rose 1.1 percent. The rate decrease should show up within 30 to 60 days.

The S&P 500 index rose 0.5% to 2,993.07. By contrast, the nine rate increases since late 2015 have lifted the same payment by $56.

Unlike credit cards and HELOCs, rates on adjustable-rate mortgages are modified annually.

Yet as many market observers have noted, the president does not have the explicit legal authority to fire a Fed Chairman. Rates remained close to zero for years. That can make it harder for the Fed to push inflation, which fell to 1.5% last month, back to its target. When the loan rate adjusts depends on what's written in your loan terms.

Apparel prices jumped 1.1% after being unchanged in May.

Federal student loans have a fixed interest rate set by Congress and are not affected by the Fed's move.

But the ongoing trade wars and signs of trouble in markets outside the United States appear to have convinced more Fed members that there is now a case for cutting rates.

But Trump's statements spooked financial markets so decisively, and the threats to the global economy became so palpable, that a rate cut now appears nearly certain.

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