As expected, the last meeting of the FED this year brought no relevant news, with interest rates unchanged. However, the slightly more dovish stance on the part of the Board members should be noted, with the message to wait for indications that the cost of money needs to be changed, however it will be easier for a dovish move, for example if inflation shows no signs of approaching the 2% target or if the economy shows signs of weakening as it is now in a phase of moderate growth, i.e. less bright than beginning of the year.
It should also be noted that it was the first time since May that the decision was unanimous, thus reinforcing the notion of tranquillity in US monetary policy soon. But if this development by the Fed has helped the Bulls for a Christmas rally, the same cannot be said of the trade war theme, with uncertainty reigning until the last few days before new tariffs came into force over $160 billion of products imported from China by the largest economy in the world. According to some sources today is likely to be the day of Trump decide on whether to postpone the new customs duties, as it is assumed that he will have a meeting with his team negotiating the trade conflict with China.
In the event of worsening trading conditions between the two countries, it is far more likely that Jerome Powell’s optimism will be overturned, and the latter days of the year may bring some extra selling pressure.
Photo by Marc Olivier Jodoin.
