The Feds Are Watching

Good Afternoon,

This past week has been all about the Federal Reserve. This week they announced a 25 bps (.25%) decrease to interest rates. Along with this decision, critical data about job growth and unemployment came out. FA Magazine republished an article in Bloomberg that highlighted one of the Federal Reserve Vice Chairman who provided additional insight on the US economy during a speech in Japan. Key points from the article were:

  • The slowdown in global growth and trade policy “appears to be headwinds for manufacturing activity and investment spending in the United States and abroad.”
  • Brexit (the UK leaving the European Union) continues to poise headwinds based on the uncertainty it creates
  • The Federal Reserve is paying close attention to consumers

The Federal Reserve President (currently Jerome Powell) has stated that the group is paying attention to all of the data points coming out. What most people might not be aware of is that our Federal Reserve is cognizant of issues beyond our borders since they play a part in the health of our economy. 

Based on the comments in the article it seems that the Fed is satisfied where the economy currently is based on low unemployment, good job growth, and inflation creeping up to the level that they are targeting (2%). They do acknowledge that business investment is lower, which is a proxy of how bullish or bearish companies are on the economy. While they are happy, they do acknowledge that there are numerous threats to our economic growth. As investors, we should take heed to their words as they have the power to create exuberance or panic.

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