A No-News Press Release from the Fed

Today, the Federal Reserve ’s policy setting body decided to hold interest rates steady—a policy move that was predicted with near certainty by financial markets. Because this Federal Open Market Committee (FOMC) meeting was not a “live” one, that is Fed Chairman Powell did not follow it with a press conference, the o nly news comes from thepress release. And the news there is basically no news at all —except for calling economic growth “strong” instead of “solid.” But this slightly more bullish tone on economic growth is not license to ignore other potential issues in the economy.One concern isescalating trade tensions. The increasing levels of protectionism emanating from the U.S. and reverberating across the globe could dampen the economic outlook. Powell, fortunately, isaware of the risks of higher trade barriers —but it remains debatable what precisely the Fed can or should do in light of mounting protectionism.Another concern is the flattening yield curve, where yields on short-term Treasury bonds have been inching higher and closer to yields on long-term Treasury bonds. If short-term yields exceed long-term yields, we end up with a yield curve inversion. Yield curve inversions oftenportend a recession, as they indicate market uncertainty about short-term prospects. While the flattening has abatedthis month—and while some Fed watchersrightly point out that if the curve stays relatively flatwithoutinverting, there is less reason to worry —the Fed...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs