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Mar­kets: Will the Fed change di­rec­tion?

The Week (US) - - Leisure -

In­vestors are bet­ting that slowed growth will keep the Fed­eral Re­serve from boost­ing in­ter­est rates, said Daniel Kruger and Nick Timi­raos in The Wall Street Jour­nal. Last week Fed-funds fu­tures showed a 91 per­cent prob­a­bil­ity that 2019 will end with rates at or below their cur­rent level—a sharp re­ver­sal from Novem­ber, when in­vestors over­whelm­ingly ex­pected rate in­creases. It’s a “sign of fad­ing con­fi­dence” that eco­nomic growth will meet the 2.3 per­cent rate Fed of­fi­cials were ex­pect­ing. The Fed raised rates last month and has pro­jected two more in­creases for 2019, but chair­man Jay Pow­ell has told in­vestors that “the Fed’s pol­icy isn’t on a fixed course.” The Fed chair­man has “lost his way,” said Dion Rabouin in Ax­ Af­ter re­vers­ing his pre­vi­ous mes­sage that the Fed would stick to its plans and not get pushed around by stock mar­ket fluc­tu­a­tions, “Pow­ell has lost cred­i­bil­ity in the eyes of many mar­ket watch­ers.” Try­ing to dodge a fight with Pres­i­dent Trump and the stock mar­ket has “gone pre­dictably awry.” In­stead of re­ly­ing on the Fed to fol­low a con­sis­tent, well-de­fined pol­icy, mar­kets “will be fully on edge and ready to dis­sect his ev­ery word.” That’s ex­actly what Pow­ell didn’t want, and the Fed whiplash could end with stocks get­ting ham­mered.

Pow­ell: Cred­i­bil­ity at stake

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