Override the models, cut prices and do it quickly

Members of the Federal Open Market Committee (FOMC) dominated the news last week along with the Federal Reserve Mayor Jerome Powell. Some gave good insight into future central bank policy movements. Some suggested what they consider to be the key factors that will affect Fed makers when they meet July 30 through July 31[ads1], and even a dramatic move in the four major asset classes – Treasuries, Dollars, Gold and Stocks. [19659002] In addition to the Fed speakers, the central bank also provided stronger than expected New York and Philadelphia Federal Reserve District reports.

Interpretation last week's comments I have determined that the fear of the unknown runs the Fed at this time. The data has not shown what the Fed can see. Remember that these are leading, delaying and random indicators.

The Fed leans toward the 25 base point rate because it sees uncertainty due to the trade conflict between the US and China. The recently released stronger than expected consumer price inflation, retail and labor reports mean the Fed still has time, so a small interest rate will buy them some time to continue monitoring the strength of the economy.

The Fed has also learned from the events of 2008 that led to the great recession – "Where there is smoke, there is a fire."

Fed's Powell recognizes the new norm

In the world before 2008, given today's economic conditions, the Fed would raise rates and tighten monetary policy. The Fed, however, acknowledges that tightening would be dangerous to the weakening of the world economy. This is why it stopped raising prices in December.

So let's just say that the Fed has been concerned about the weakening global economy and its impact on the US economy for at least seven months, and the impact of rising US interest rates on the global economy. And now it feels that it must make a preventive strike to continue the 10-year expansion. And this preventive strike will be a simple quarterly rate.

In a speech in Paris, titled "Monetary Policy in the postwar period," Fed Chair Powell last Tuesday confirmed this new approach. 19659010] "The world the policemen are doing now is discreetly different in important ways from the one before the great recession," he said.

Powell added: "I should also note, as appropriate for this event and this audience, that since crisis policies are even more concerned with the relevance of global politics in our policies, the global nature of the financial crisis and the channels that the scattered strongly emphasizes the context Between our economic, financial and political environments, US economic developments affect the rest of the world, and vice versa, too. "

" In addition, we have seen how monetary policy in one country can affect the financial and financial conditions of others through financial markets. Trade and Trust Channels To follow our domestic mandates in this new world requires that we understand the expected effects of these interconnections and incorporate them into our political decision-making. "

" Trend inflation, productivity, and interest rates fell well before the crisis. Monetary policy makers in that period were the threat of high inflation, the hard fight The MP to control high inflation has recently been won. "

Powell can see trend change, productivity, and interest rates fall now and feel the time is right to trade.

New York Fed's Williams Reveal Fed Playbook

On Thursday, New York revealed Fed President John Williams Fed & # 39; s playbook for an over-demanding market that sought for negotiable comments from central bank officials.

Williams said that in a low-interest environment, it is better to act quickly when there are signs of trouble. Is this really new? After all, good traders know that If there is one thing like a good loss, the quick loss is the best, in other words, get out when you are wrong. "" First, you take quick action when faced with unfavorable economic conditions, "Williams said. Secondly, keep interest rates lower for longer. And third, adjust monetary policy strategies to succeed in context "of persistently near zero interest rates.

History continues