Rates tick lower on Fed Chair Powell's prepared statement and trade war

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Published Date 8/23/2019

Rates and stocks are ticking lower and on Fed Chair Jerome Powell's prepared statements at Jackson Hole Symposium.

Fed Chair Jerome Powell released his prepared speech at 10:00 am ET.

Here are a few key highlights:

He said, "based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective."
He cited/highlighted three adverse developments since the last FOMC meeting: New Tariffs on China and from China, further evidence of a global slowdown, notably in Germany in China and a sharp downward move of long-term bond rates around the world "to near post-crisis lows."
Fitting Trade Policy Into Risk-Management Framework Is a New Challenge
US Economy Has Continued to Perform Well Overall
Monetary Policy Cannot Provide Settled Rulebook for Trade

The minutes from the ECB meeting are out; the ECB is going to announce a major stimulus QE, buying bonds, and lower interest rates. It didn't do it at the meeting, but the reports are leaving no doubt the ECB is going to move. The debate in the meeting centered on whether a piecemeal approach or an all-in move with both QEs and cutting rates at the same time; the conclusion was for an all-in move likely next month. The Bank has made it clear leaving markets to prepare.

Most all focus now is on what Powell said, but this weekend also has a G-7 meeting of leaders in France. China's announcement of additional tariffs will add more unsettled issues to talk about. France's Emmanuel Macron and leaders including the UK's new prime minister, Boris Johnson, along with US President Donald Trump, disagreements over everything from Brexit to the future of the global trading system likely will stand in the way of unified solutions.

China announced new tariffs on $75B US imports to retaliate against US moves to slap punitive tariffs on an additional $300B of Chinese goods. Tariffs of 5% and 10% on what amounts to roughly the remaining US imports it has yet to imposes punitive taxes on including autos and auto parts. The tariffs coming in two moves; Sept. 1 and Dec. 15, the same dates US tariffs go into effect. Agricultural products, apparel, chemicals, and textiles.

At 10:00 am ET July new home sales, expected at 645K generally unchanged from June. As released sales at 635K but June revised to 728K from 646K.

Source: TBWS

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