The US Federal Reserve cut interest rates in the USA again yesterday. Following the press conference with Fed Chairman Jerome Powell, the markets are looking for direction.
Powell's statements on the outlook are leaving investors unsettled
As expected, the Fed cut the key interest rate yesterday by 25 basis points to 4.75%. This rate cut is in line with market expectations and was therefore already largely quoted. The important part was therefore the press conference with Fed Chairman Jerome Powell following the FOMC meeting.
In the press conference, Powell largely avoided making any clear statements on the further development of interest rates in the US until the end of the year. He referred to the two upcoming inflation reports and the labor market report (NFP) for November, which will be published before the next interest rate decision. These will of course have a considerable influence on the last interest rate decision this year.
More important, however, is what he said with regard to bond yields. According to Powell, these would rise less because of inflation than because of the growth prospects in the US. However, this is only half the truth.
Economic policy under Trump could push up inflation again
When Donald Trump takes office as US President at the end of January 2025, the markets will see great opportunities for economic growth in the US. If the plans expressed during the election campaign are taken into account, this is also very likely. Among other things, he plans to significantly reduce energy prices and renovate the infrastructure neglected by the Biden administration.
However, it is also true that these measures are associated with considerable costs, which could increase the US deficit and thus drive up inflation again. Therefore, it cannot be ruled out that the US Federal Reserve will postpone the interest rate cut expected for the December meeting until 2025 in order to anticipate this possible development. This also applies in light of the fact that inflation data has recently been slightly worse than expected.
US indices in a waiting position
After reaching new highs yesterday in the run-up to the interest rate decision, the major US indices moved sideways during the press conference. They are likely to wait for economic data that will influence the Fed's future actions. This could start today with inflation expectations from the University of Michigan. Next Wednesday, data on the actual rise in consumer prices could then provide a decisive impetus for the future direction of the US stock markets.
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