Fed’s Bullard Makes Case Again for Halting Interest Rate Hikes

Fed’s Bullard Makes Case Again for Halting Interest Rate Hikes

Fed’s Bullard Makes Case Again for Halting Interest Rate Hikes

$DIA, $SPY, $QQQ, $RUTX, $VXX

The US Federal Reserve should hold off on further interest rate rises because the stance of monetary policy is already at neutral or possibly restrictive, St. Louis Federal Reserve Bank President James Bullard said Wednesday.

Mr. Bullard has repeatedly raised the alarm over the central bank’s plan to keep raising its benchmark lending rate and pointed to financial market signals as the best indicator of how policymakers should proceed.

“U.S. monetary policymakers should put more weight than usual on financial market signals in the current macroeconomic environment,” Bullard said in prepared remarks to a financial market conference in New York.“Handled properly, current financial market information can provide the basis for a better forward-looking monetary policy strategy.”

Those signals, such as the yield curve on US Treasuries, suggest investors see slower growth after this year and no danger of inflation ahead.

An inverted yield curve, when short-term borrowing costs rise above long-term ones, has preceded nearly every US recession in recent times. Mr. Bullard expects an inversion late this year or next.

Mr. Bullard’s colleagues, however, look set to continue with increase borrowing costs with part of the rationale being that the low unemployment rate and strengthening economic growth should spur a rise in inflation.

The Fed’s preferred measure of inflation has finally reached the Fed’s 2% target rate this year after more than six years of undershooting it.

Investors fully expect an interest rate rise at the Fed’s next policy meeting on 25-25 September, and again in December. The central bank has already lifted rates 2X this year.

But focusing on a theoretical relationship between low unemployment and a subsequent rise in inflation to guide monetary policy is erroneous, according to Mr. Bullard.

“One of the great strengths of financial market information is that markets are forward-looking and have taken into account all available information when determining prices,” he said.

In Washington

Trade talks between the US and Canada resumed Wednesday. Meanwhile, investors looked ahead to Thursday when the White House could announce its decision regarding another round of tariffs; this 1 targeting $200-Bworth of Chinese goods.

Wednesday, the US major stock market indexes finished at: DJIA +22.51 at 25974.99, NAS Comp -96.07 at 7995.20, S&P 500 -8.12 at 2888.34

Volume: Trade on the NYSE came in at 815-M/shares exchanged

  • NAS Comp +15.8% YTD
  • Russell 2000 +12.5% YTD
  • S&P 500 +8.0% YTD
  • DJIA +5.1% YTD

HeffX-LTN’s US Major Stock Market Indexes Technical Analysis

Date Symbol Price Technical Analysis Support Resistance
5 September 2018 QQQ 183.5 Bullish (0.29) 182.69 186.64
5 September 2018 DIA 259.7 Bullish (0.39) 258.74 261.54
5 September 2018 SPY 289.07 Bullish (0.28) 287.70 290.80

 

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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