Central bankers now must cut interest rates to compensate for politicians’ mistakes

davfor

Its my sense this article helps explain how and why the Feds policy making criteria have evolved in recent years.

Central-bank independence is back in the news. In the United States, President Donald Trump has been berating the Federal Reserve for keeping interest rates too high, and has reportedly explored the possibility of forcing out Fed Chair Jerome Powell. In Turkey, President Recep Tayyip Erdoğan has fired the central-bank governor. The new governor is now pursuing sharp rate cuts. And these are hardly the only examples of populist governments setting their sights on central banks in recent months.

https://marketwatch.com/story/central-bankers-now-must-cut-interest-rates-to-compensate-for-politicians-mistakes-2019-07-31?siteid=yhoof2&yptr=yahoo

davfor

Here are a couple of headlines I just noticed on the Reuters news site. They are signs of how bizzaro things have become. Dropping the rate is now hawkish. Maybe the markets were expecting certainty the rate is heading to zero!

"Asian shares seen falling on 'hawkish' Fed outlook"

"Dollar jumps, stocks fall after Fed rate outlook; pound stalls
* Fed cuts rates by 25 basis points, further cuts not certain"

We are in a strange new world all right...

hank

Strange day. I lagged my bogey (TRRIX) for the first time in quite a while (-0.43% vs -0.39%). Culprit was my small stake in the miners which have soared for several months. OPGSX, fell 3.7% for the day.

Didn’t follow the news flow throughout the day. But if the Fed cut by quarter point and everything (except longer dated Treasuries) still went into the dumpster - than Heaven help us.

Derf

@ hank: My port was all red with a few N.A..
Derf

rforno

YES. I heard 'hawkish cut' on the commentary yesterday and thought the pundit mis-spoke.

Politicians are making a pigs' breakfast of everything and expect central bankers to bail them out and/or provide political cover for re-election. Central bankers, and their victims, are now the poor shleps following the horses on parade (idiotic politicians) with the shovels and rubbish bins, it seems.

Welcome to Bizzaroland.

davfor said:

Here are a couple of headlines I just noticed on the Reuters news site. They are signs of how bizzaro things have become. Dropping the rate is now hawkish. Maybe the markets were expecting certainty the rate is heading to zero!

"Asian shares seen falling on 'hawkish' Fed outlook"

"Dollar jumps, stocks fall after Fed rate outlook; pound stalls
* Fed cuts rates by 25 basis points, further cuts not certain"

We are in a strange new world all right...

hank

In the end, global economies / cyclical trends will do what they will do. Central bankers and politicians can warp the timelines by some years. They may speed things up, prop things up, mitigate the fallout, delay the inevitable - or even make things worse (as some of the above comments suggest). But economic cycles are likely to prevail over the longer run. I think that’s what the response to the rate cut suggests.

From Dickens: "Tell Wind and Fire where to stop, but don't tell me." - (Madame DeFarge)

Might well be the global economic structure addressing the Federal Reserve and the politicians.