The US Federal Reserve cut interest rate by 25 basis points on schedule, and gold price plummeted nearly $10

category:Finance
 The US Federal Reserve cut interest rate by 25 basis points on schedule, and gold price plummeted nearly $10


After the Federal Reserve announced interest rate cut, the U.S. stock index fell slightly, while the U.S. dollar index rose 0.27% to 97.95 in the short term. Spot gold plunged $10 to $1482.1 an ounce.

Inflation remains the focus of the FOMC Committee

Information received since the September meeting of the Federal Open Market Committee (FOMC) shows that the US labor market remains strong and economic activity is growing at a moderate rate, according to the Feds interest rate statement. In recent months, employment has been stable and the unemployment rate is still very low. While household spending has been growing strongly, business fixed investment and exports remain weak. In the past 12 months, the overall inflation rate and the commodity inflation rate excluding food and energy are both lower than 2%, and the long-term inflation expectation index based on the survey has hardly changed.

Buying bonds only to stabilize interest rates, not restart QE

The statement also referred to the recent expansion of the Feds balance sheet. Members pointed out that the Fed had been buying bonds to keep the federal funds rate within the target range, rather than to restart quantitative easing. Open market operations will continue at least through the second quarter of 2020, while regular and repo operations aimed at stabilizing the overnight market will continue at least through January of next year.

Nevertheless, the Feds balance sheet has increased by about $100 billion in the past month, and has once again broken the $4 trillion mark, of which $3.6 trillion comes from US Treasuries and mortgage-backed securities.

The statement deleted the previous statement of dove school

In determining the timing and scale of future adjustments to the target range of the federal funds rate, the committee will assess the achievement of the full employment target and the 2% inflation target, taking into account information such as labor market conditions, inflation pressures and inflation expectations.

In the FOMC statement, the phrase take appropriate action to maintain the momentum of expansion that has been appearing since the June meeting was deleted and replaced with a more vague phrase: in assessing the appropriate path to the target range of the federal funds rate, the committee will continue to monitor the impact of the information received on the economic outlook. The current monetary policy position may still be appropriate, Powell said more clearly at a subsequent press conference. We have seen that the core inflation rate once hit the 2% target, but it will not last for long, starting from the interest rate cut we took a few months ago. So I think before considering future rate hikes, the Fed needs to see a sustained and significant increase in inflation. Powell stressed that any future interest rate hike must be based on the sustained and stable growth of inflation rate, which may mean that the Feds next interest rate hike may take a long time to wait, because the Feds preferred inflation indicators show that this change will be a slow process. Source: First Financial Editor: Wang Xiaowu NF

In the FOMC statement, the phrase take appropriate action to maintain the momentum of expansion that has been appearing since the June meeting was deleted and replaced with a more vague phrase: in assessing the appropriate path to the target range of the federal funds rate, the committee will continue to monitor the impact of the information received on the economic outlook.

The current monetary policy position may still be appropriate, Powell said more clearly at a subsequent press conference. We have seen that the core inflation rate once hit the 2% target, but it will not last for long, starting from the interest rate cut we took a few months ago. So I think before considering future rate hikes, the Fed needs to see a sustained and significant increase in inflation.

Powell stressed that any future interest rate hike must be based on the sustained and stable growth of inflation rate, which may mean that the Feds next interest rate hike may take a long time to wait, because the Feds preferred inflation indicators show that this change will be a slow process.