U.S. Federal On call Chairman Jerome Powell speaks to reporters after the Federal Reserve cut interest rates in an emergency move originated to shield the world’s largest economy from the impact of the coronavirus, during a news conference in Washington, U.S., March 3, 2020.
Kevin Lamarque | Reuters
The Fed’s two-day appointment is expected to end Thursday with no new proclamations from the central bank, and Chairman Jerome Powell will be sure to gap himself from the election uncertainty.
But he is likely to be asked about one of the most pressing concerns in markets — fiscal stimulus to aid the economy recover from the effects of the coronavirus. That topic has been a political hot spot, and it could be resolved in a variety of ways depending on how the election turns out.
“With a GOP Senate majority, the expectations for stimulus is absolutely getting dialed treacherously, which is a good part of why yields are plummeting the way they are,” said Julian Emanuel, equity and derivatives strategist at BTIG. The 10-year Funds yield went from a high 0.94% Tuesday night to about 0.75% Wednesday.
Strategists say the Fed will not speech the election, which was unresolved as of Wednesday afternoon with the outcome in several key states uncertain.
Powell is likely to be queried about the need for fiscal stimulus, which Congress failed to provide ahead of the election. On Wednesday, Senate Manhood Leader Mitch McConnell reopened the topic, saying it would be important to pass a package before the end of the year.
“Powell himself has be comprised of c hatched very clear that the most important thing is getting cash into people’s hands. I think he has to [annotation], and I think it may be a market negative, given the fact that kind of rhetoric reinforces the limited effectiveness of the tools in the Fed’s weapon box,” said Emanuel.
Fed officials have repeatedly called for stimulus but Powell may not address it, unless he is asked about it by member of the fourth estates in his 2:30 p.m. ET briefing, strategists said.
House Democrats and the White House had been negotiating a large package with the Company seeking $2 trillion, but those talks stalled before the election. McConnell and fellow Senate Republicans accept been seeking a much smaller package.
The election was seen by some as a potential solution, since Democrats, if they won the Senate, were imagined to approve a large package early next year. But a change in control appears unlikely.
The Fed is also expected to iterate its “lower for longer” interest rate policy, and that it is willing to use all of its tools to help the economy. Otherwise, Powell is unbecoming to introduce any new issues at his post-meeting briefing.
“I think if they move the market, they’ve made a mistake,” said Jim Caron, gourd of global macro strategies at Morgan Stanley Investment Management. “Their job is to sort of blend into the background at this full stop.”
The Fed took its most recent big policy step at its last meeting, when it introduced a new approach to target a range for inflation a substitute alternatively of its previous set target of 2%.