US FRB 17th monetary policy deciding meeting September 17, 5:32
The FRB, the US central bank, will hold a meeting to decide monetary policy from the 17th. Following the July meeting, when Powell decided to cut rates for the first time in 10 and a half years in order to maintain the expansion of the economy, this time also suggests the possibility of further rate cuts. Will be.
The FRB will hold a meeting to decide monetary policy for a period of two days from the 17th.
At the last meeting in July, the FRB decided to cut rates for the first time in about 10 and a half years since 2008 when the Lehman shock occurred.
Since then, trade disputes between the United States and China have intensified, and the slowdown in the world economy, such as China and Germany, has become clearer, and American companies are increasingly cautious about the future of the economy.
Against this backdrop, President Powell will be interested in the decision of the FRB, suggesting that there may be additional interest rate cuts at this meeting in order to maintain economic expansion.
In addition, in order to determine the future of monetary policy, there is a growing interest in the number of future interest rate cuts that FRB has announced once every three months.
On the other hand, President Trump demanded a drastic reduction in interest rates to support the economy in the face of rising oil prices due to attacks on oil facilities in Saudi Arabia. It is getting stronger.
President Powell Changed to policy
In fact, FRB Chairman Powell has cut interest rates for the first time in 10 and a half years since 2008 when the Lehman shock occurred in July.
A press conference immediately after that stated that this measure is not the beginning of a long-term rate cut, and he was cautious about additional rate cuts.
But last month President Trump announced additional tariffs on China, and it became clear that Germany's GDP, which is closely related to the Chinese economy, turned negative, and the financial market became unstable.
For this reason, President Powell expressed his strong concern about the future of the world economy at the lecture of the economic symposium held on the 23rd of last month and said, “We will act appropriately to maintain the expansion of the US economy.” Suggested the possibility of further rate cuts.
On the other hand, Powell said in the same talk: “Government and parliament are the ones who decide trade policy. Monetary policy is a powerful tool to support consumption and investment, but it cannot provide a rulebook for international trade. "Said.
In this way, President Trump is no longer dissatisfied with urging pressure to deal with the negative effects on the economy caused by trade friction between the United States and China by monetary policy alone.
President Trump “Efforts to cut interest rates are necessary”
President Trump posted on Twitter on the 16th: “The United States is paying much higher interest than the rest of the country because of the Federal Reserve,” FRB and President Powell have no clue. It is unbelievable, and the price of crude oil is also rising. It is necessary to stimulate the economy by drastically reducing the interest rate, ”he said. I applied pressure to pull it down.
Is it a recession against the background of interest rate cuts?
President Trump urged further rate cuts after the FRB decided in July for the first time in 10 and a half.
On the 11th of last week, we posted on Twitter that “FRB should cut interest rates to zero or below,” and asked them to step to zero or negative interest rates.
Also, Powell's personal criticism has been intensifying, and he told reporters on 23rd last month that Powell suggested additional rate cuts, saying that he is not a very good chess player. On the other hand, when asked if he would ask for Powell's resignation, he replied, “I can't stop if he wants it,” and he was frustrated.
In the background of such remarks, while it has been more than a year until next year's presidential election, there is an observation that the US economy is going to recede in the stock market etc. due to the escalation of trade disputes between the US and China. There may be.
According to a poll released by the Washington Post and ABC TV on the 10th of this month, 60% of respondents said there was a possibility of a recession over the next year.
In response to such a recession, President Trump is eager to appeal his achievements as the economy has strengthened against the backdrop of steady employment.
On top of that, if the interest rate is further reduced, the stock market will be activated, and it will also lead to lower interest on corporate loans and consumer loans, and it seems that the expansion of the economy can be maintained.
Global currency depreciation competition
The global concern now is that national central banks are increasingly competing for lower interest rates and the resulting currency depreciation.
In the meantime, Korea, Russia, South Africa, Turkey, Indonesia, Brazil and other countries decided to cut rates, and last week the European Central Bank further advanced an unusual policy to further reduce negative interest rates.
A major trigger for this trend is the policy change of the FRB, which issues the world's key currency dollar.
The FRB changed its financial tightening stance in December last year by stopping the interest rate hikes that had been promoted in stages as the economy expanded.
In July, we cut interest rates for the first time in 10 and a half years since 2008 when the Lehman shock occurred.
For each country, if the Fed cuts interest rates and the dollar falls, there is a concern that, on the contrary, the value of their own currency will rise and be disadvantageous for export.
The IMF = International Monetary Fund, which is responsible for the stability of international finance, is strongly alarming against such interest rate cuts and currency depreciation.
Even if a country with a trade deficit leads to a currency depreciation that reduces the currency by 10%, the deficit is only about 0.3% of GDP = gross domestic product, and the effect is limited.
On the contrary, it has been pointed out that the induction of currency depreciation leads to retaliatory actions such as raising tariffs, such as trade friction between the United States and China, and eventually worsens the economy of all countries.
Also, if monetary easing progresses more than necessary, there is a risk that a large amount of funds will overflow into the market and individuals and companies will borrow too much money, surplus money will gather in real estate etc. and prices will rise abnormally, There may be a bubble that overheats the economy.
Moreover, if the economy continues to ease, even if the economy is not so bad, there is a concern that the central bank will have limited scope for policy measures such as interest rate cuts when a truly serious economic crisis occurs.