Forex - US Dollar Rises, Even as Bigger Fed Rate Cut Expected

  • Forex - US Dollar Rises, Even as Bigger Fed Rate Cut Expected

Forex - US Dollar Rises, Even as Bigger Fed Rate Cut Expected

At a central banking conference yesterday, New York Fed President John Williams argued for pre-emptive measures to avoid having to deal with too low inflation and interest rates.

Stocks had rallied late on Thursday after two influential Federal Reserve officials - New York Fed President John Williams and Fed Board of Governors Vice Chair Richard Clarida - laid out the case for quick action by the central bank to support the us economy. When adjusted for inflation, the neutral rate is near the Fed's current policy rate, which is in a range of 2.25-2.50 per cent.

The U.S. dollar was higher on Friday, even as expectations rose that the Federal Reserve will cut interest rates by half a point at the end of the month. Despite the dollar gaining, market and currency analysts are expecting a rate cut in July. The odds eased to around 40% after the New YorkFed said William's speech had not been about immediate policy direction.

"It was not about potential policy actions at the upcoming FOMC meeting", the spokesperson added.

James Brian Bullard, president of the Federal Reserve Bank of St. Louis, said today that he would be willing to serve as the Fed's Chair in the future, cited by Reuters.

Fed Vice Chairman Richard Clarida and New York Fed chief John Williams stressed the need to act quickly if the USA economy looked likely to stumble during the US session.

Economic analysts, however, say that while the Fed's shift does mark a sudden turn of events, it's not the first time the central bank has reversed monetary policy so quickly.

Let's face it, the stock market was pretty tiresome last week until late Thursday before dovish comments from a prominent Fed official helped the major indexes recover close to half of their losses from four days of selling pressure.

"In other words, Williams unintentionally misguided the markets", Bank of America's Michelle Meyer wrote.

In other words, the demand of the Trump administration is that the Fed should not only juice Wall Street at home, in order to further siphon wealth into the hands of the financial elite, but must directly function as a United States weapon in the global war against Washington's economic rivals.

But the comments caught the attention of President Donald Trump, who said Williams's remarks were "100% correct in that the Fed "raised" far too fast & too early".

"Don't blow it!" he urged the Fed in a later tweet. Williams's remarks reflected on his research on reacting to "adverse" economic developments with rates close to zero.

Plus, despite relatively strong economic data, there are a number of "unusual uncertainties" on the horizon that are weighing on the outlook, said Josh Wright, the chief economist at iCIMS and a former Fed staffer. Friday was the last day that investors will hear from Fed officials until they release their policy statement at the close of the July meeting.

In sum, the growing consensus is that the Fed will most likely cut rates, starting with 25 bps.