Powell’s gloomy outlook has investors predicting the Fed may make another big move soon
Federal Budget,Jerome Powell,Economy And Jobs,Coronavirus,Economic Policy
Fed Chairman Jerome Powell’s gloomy view of the economy has markets looking for more guidance on what the central bank will do next to help prop it back up.
Some strategists believe the Fed could announce a new quantitative easing program of a set size or pace before or at its June 9-10 meeting. Quantitative easing was first used by the Fed during the Great Recession and became known as QE.
Powell, in a webinar Wednesday, also knocked the idea of negative interest rates, which had been speculated about in the market. Last week for the first time ever, fed funds futures implied a negative fed funds rate. After his comments, the futures rose slightly but still implied slightly negative rates, starting next March.
Powell called negative yields, used in Europe and Japan, an “unsettled” policy and said it’s not clear whether there are benefits, though it hurts banks and their ability to lend.
Selling in stocks gained momentum after Powell’s comments about the economy, and Treasury yields were steady at lower levels. Strategists said fed funds futures were likely responding to technical trading and hedging.
