Fed’s Meeting Minutes Depict Strong Economy with Mild Recession Fears Studying the Fed’s meeting minutes can give an overall picture of the economy which could help you plan your moves.
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Studying the movements of the Fed is an important aspect of planning stock trading and investment strategies. The Fed’s rates influence loans in banks on which industries and businesses are dependent. The Fed’s policymakers have eagle eyes to study the minute details of the economy as well as look to the future.
Could There Be a Recession? The Fed is keeping its eyes open for recession, according to the minutes of the June 12-13 meeting of the Federal Reserve that were released recently and discussed on Nasdaq. This was the meeting where the Fed raised the rates of interest for the second time in 2018. The minutes also described the general concern of the American central bankers regarding the potential of global trade tensions to affect the economy which has otherwise been looking strong. The policymakers at the Fed also seemed to be gravitating to the viewpoint that the rate-hiking cycle is so advanced that the policy was not playing a part in constraining or boosting the economy.
Intensification of Trade Policy Risks Discussed Most of the policymakers also observed that there has been an increase in the intensity of the risks and uncertainty related to the trade policy. There was a fear that these uncertainties could eventually have negative consequences. The latest round of tariffs imposed by the United States is
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viewed as adversely impacting investment. As a result, Fed officials would be closely monitoring how the tariffs affect businesses. The gains made earlier by the US stock prices were stripped further. Those gains were brought about by the circulating reports regarding the potential cooling of tensions between the US and the European Union on the tariffs on car sales. The US dollar extended the losses against a host of currencies.
Two Recession Indicators Policymakers at the Fed had a comprehensive discussion on whether there are signs of an upcoming recession as a result of the slim difference between the short-term and long-term interest rates. The participants also felt the slope of the yield curve needed to be monitored. There was also a discussion on the gap existing between the current policy rate of the Fed and the expected rate many quarters ahead that’s derived from the futures markets. This could be an indicator of recession. According to the Fed staff, this indicator could be more reliable than what’s presented in the yield curve since that is distorted by various temporary factors. However, it still isn’t clear whether the Fed policymakers have actually considered the yield curve or the spread in the current policy rate versus expected rate as indicating an oncoming recession.
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Generally, policymakers have been in agreement that the recent economic data indicated a strong economy evolving as per their expectations. Finally, there were some global factors discussed too, such as the developments in Europe and some emerging nations, politically and economically. These could have a bearing on the US economy.
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