Fed Readies Markets for July Rate Cut (Video)

Fed Readies Markets for July Rate Cut Video by Peter Schiff

Fed Tweaking Language to Officially Adopt Easing Bias –

Keeping with its tradition of having a tendency to act incrementally, the Federal Reserve Open Market Committee today announced that it was leaving interest rates unchanged – which was the consensus. There was an 80% probability that the Fed would leave interest rates unchanged. The other 20% was that they would cut rates. So there was a zero percent probability that the Fed would increase rates. But before delivering an official rate cut, what the Fed wanted to do was to prepare the markets in advance and take one step in that direction, which was to tweak its language to officially adopt a bias toward easing, which is exactly what the Fed did.

Fed to Sustain “Expansion” –

Video Source

The Fed basically acknowledged that the economic data had been weakening and that they wanted to do what was appropriate, or that they were willing to do what was appropriate to sustain the expansion. Now, they didn’t come right out and say that the economy is headed for a recession; even though that is exactly what is happening. They said they wanted to see more data before they moved. But after they failed to cut rates, the probability for a rate cut in July, which is the very next time the Fed meets, rose to 100%. So they took the 20% probability for the cut in June, since we didn’t get it, the markets added that to the 80% probability of a cut in July.

Looking Toward Negative Data –

Which means the markets are convinced that whatever data the Fed sees between now and the July meeting in going to be bad. It’s not going to be good (positive) data. Of course, it IS going to be bad data. The data has been bad. The economy has been weakening. We’ve been seeing a series of weakening economic data. The economy is not just slowing down, it is headed to a recession. That is something that the Fed will never admit.


Sharing is caring!

Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.