Richard H. Clarida, Vice Chairman of the FED, is going to be addressing the media on Thursday in a press conference that is aimed to delineate on the recent decision of the FOMC to lower the interest rate. After he is done with his statement, Vice Chairman Clarida will be addressing questions from journalists, around which time the markets are expected to become especially volatile.
He is expected to comment on the projections of the for economic growth in the near-term. Last week Jerome Powell addressed the issue and announced that the bank was expecting the growth rate to decrease to around 2 per cent and then continue with a more moderate pace.
Last Friday Clarida applauded the strong consumer sector in the country, which according to him is currently demonstrating outstanding performance. He went on to state in an interview for CNBC cited by Reuters, that:
“I have a lot of confidence…I cannot think of a time where in the aggregate the consumer has been in better shape. […] We all agree we are in a good place and that the momentum is solid…we think of the adjustment we made this week and in July as providing some insurance against some downside risks to a favourable outlook.” [source]
In light of the recent drone attacks in Saudi Arabia and the aforementioned heightened trade uncertainty, it appears that Vice Chairman Clarida and his colleagues at the FOMC felt compelled to reduce the interest rate mostly because of these geopolitical events and in spite of the favourable economic conditions, which Mr Clarida outlined in his statement.
Recently markets have been greatly impacted by the development of such geopolitical events and situations, most notably the substantial tribulations that were felt in the oil market last week. As a consequence, the primary focus of monetary policy, at least for the time being, seems to be shifted away from supporting expansion economics in favour of ensuring the protection against the detrimental impact of geopolitics on growth.
It is for that reason that this week’s press conference of Vice Chairman Clarida is anticipated by investors, who are eager to hear just how certain the FED is that the recent reduction of the interest rate is going to provide sufficient insurance against such uncertainties resulting from unstable geopolitics. Meanwhile, the stocks market in the US continues to exhibit resilience to these recent developments, a prime example being the S&P 500. The index is currently trading at around 2992, which is just below the psychologically important level of 3000.
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