Less than a year ago the dominant talk was, how much and when will the FED increase its interest rates, so by late September it was a done deal, one more hike in 2018 and three more in 2019, followed by three more in 2020. Well, at least until the “market” decided it was enough, yes there was some chatter about the FED is too aggressive for the sustainability of the economy, especially due to the uncertainties surrounding the economic scenario, like the trade war, but then again the major issue was self-imposed by Trump.
Photo by Ludovic Toinel.
Which leads me to a theory that I have mentioned before, Trump wants lower rates and a trade war is a perfect way to accomplish that, because he knows too well that a drop in Wall Street will influence the purchasing power of the main street, which in turn affects a big chunk of the U.S economy engine. We saw the power of the market in October at the end of the last year. This May, all three pivotal moments in preparation for the expected cut. Jerome Powell will announce on Wednesday, but it won’t end there, the outlook will be as important, investors want more easing and faster, they will force the FED´s hand with a market correction, if the central bank doesn’t live up to those expectations.
