Wednesday, President Trump said he strongly believes the Fed should have negative interest rates, but gave a modicum of approval to Fed Chairman Powell who said earlier in the day the FOMC would not lower rates beyond Zero.
President Trump said Mr. Powell, who he frequently criticizes, has improved in his performance as the Fed’s head, but he still disagrees with when it comes to the lending rate set by the FOMC.
“I feel strongly we should have negative rates,” President Trump told reporters at the White House. “The Chairman – he is my MIP over the last few months. He has done a very good job.”
President Trump meant “Most Improved Player.”
Mr. Powell earlier Wednesday said the Fed is still not looking at setting rates below Zero, and instead pushed lawmakers to use spending to boost the economy during the C-19 coronavirus chaos.
Interest rate futures tied to Fed interest rate policy expectations recently began pricing a chance of sub-Zero US rates within the next year.
As a former real estate developer, the notion of being able to borrow at low or negative rates suits President Trump’s mindset, the strong USD has given him leverage to push for negatives rates.
Mr. Powell said the FOMC prefers alternatives such as forward guidance or hard signals of how long current policy will remain in place and large-scale asset purchases, also known as QE.
Futures contracts that mature from April 2021 through March 2022 are priced to reflect a fed funds rate of between minus 0.01% and minus 0.025% at contract expiration, as hedges are being put in place in case the Fed goes in that direction.
In speaking about this with Bruce WD Barren, a noted international economist and Chairman at The EMCO/ Hanover Group today, he said, “Yes, I concur but negative interest rates will probably be in the form of bond price discounting, not in the pricing of the actual interest rate itself.This is often the technique used by Wall Street to offset the negative physiological effect of such pricing. “
Wednesday, the major US stock market indexes finished at:
DJIA -516.81 to 23247.97, NAS Comp -139.38 to 8863.19, S&P 500 -50.12 to 2819.87
Volume: Trade on the NYSE came in at: 1.1-B/shares exchanged
- NAS Comp -1.2% YTD
- S&P 500 -12.7% YTD
- DJIA -18.5% YTD
- Russell 2000 -26.1% YTD
HeffX-LTN’s overall technical outlook for the major US stock market indexes is Neutral with a Bullish bias in here.
Looking Ahead: Investors will receive the weekly Initial and Continuing Claims report and Export and Import Prices for April Thursday.
Have a healthy day, Keep the Faith!