Hints Of Fed Rate Cut Pulls Up Stocks-Latest Report

Mae Love
June 12, 2019

Investors increasingly expect the Fed to cut rates amid signs the USA and world economies are decelerating.

He argued that China, with closer political control of its central bank, could devalue its currency or use other tools to offset the tariffs Trump has imposed on Chinese imports.

But Fed Chairman Jerome Powell hinted during a speech last week that policymakers were willing to cut interest rates, depending on how global trade developments impact the USA economic outlook and whether inflation remains muted.

In its place is likely to be something more along the lines of what Powell said last week - namely, that the Fed is "closely monitoring" the economy and is ready to "act as appropriate to sustain the expansion". This intervention was widely viewed as rate cuts.

Trump has frequently criticized the Fed - and Jerome Powell, whom he nominated, - for what he perceives as too-tight monetary policy.

At the same time, inflation is showing signs of firming by another measure that the Fed prefers. "As such, financial markets will see little reason for the Federal Reserve to hold back from rate cuts in coming months to combat the perceived threat of a slowdown caused by intensifying trade tensions", says James Knightley, chief global economist at ING.

US inflation rose by 0.1% in May, down from 0.3% in April but in line with the market consensus, Bureau of Labor Statistics data shows.

Compared to May of past year, USA consumer prices are up 1.8%, slowing from the 2% increase in April.

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-Economists surveyed by Bloomberg had forecast the core gauge would rise 0.2 per cent from the prior month and 2.1 per cent from a year earlier, with corresponding gains of 0.1 per cent and 1.9 per cent projected for the broader index.

The Dow Jones Industrial Average rose 58.33 points, or 0.22%, to 26,121.01, the S&P 500 gained 5.92 points, or 0.21%, to 2,892.65 and the Nasdaq Composite added 14.99 points, or 0.19%, to 7,838.15.

-Shelter costs rose 0.2 per cent, as owners-equivalent rent, one of the categories that tracks rental prices, increased 0.3 per cent.

The 0.1 percent increase was the smallest increase since January, MarketWatch reported, matching its analysts' forecast.

The Pound-to-Dollar rate was 0.11% higher at 1.2737 but is down 0.02% for 2019 after having fallen 2% in the last month. Electricity prices were down 0.8%.

But prices for airline tickets, household furnishings and new vehicles rose last month.

Trump also accused Europe, but also other economic power blocks, of manipulating the value of currencies.

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