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US Fed Chair Dampens Expectation for Rate Cuts in Near-Term

Dow Jones New York Stock Exchange
Dow Jones

The US Fed Chair is maintaining the accommodative stance the US Fed has assumed after the last three rate cuts, saying that doing three rate cuts was not in the original plan of the Fed.

In further comments, Jerome Powell seems to suggest that the Fed is prepared to stand pat for quite some time to come. He also maintains that any upward adjustment in rates must be followed by a “significant persistent move up in inflation”.  In apparent reference to the recent job numbers, Powell also said that unemployment can stay low for some time and would not exert upward pressure on inflation.

Here are other excerpts from the Fed Chair’s comments as he takes questions from members of the press.

“Inflation is getting weaker and weaker over the years.”

“We believe policy is somewhere accommodative…There is a relationship between inflation and the labour market.”

“We expect moderate growth to continue”

“Notes rising incomes and consumer confidence”

“Monetary policy well-positioned to serve America”

“Policy is not on a pre-set course and will respond accordingly to material changes in the outlook”

“Pressures in money markets in recent weeks have been subdued.”

“Stand ready to adjust repo operations to keep Fed fund rate in target range.”

Technical Outlook on the Dow

The Dow Jones Industrial Average is responding positively to the comments by the US Fed Chair and the index is now trading at 27909 as at the time of writing, up from intraday lows of 27795.

Continuation of this upward trajectory will see the Dow start to challenge the all-time highs that were attained recently above 28000.

However, the US-China trade situation continues to hang like a cloud over the Dow and could exert downward pressure. If this is the case, the support levels of 27765 and 27353 will continue to remain in the horizon as possible targets.