Powell to Stress Fed Patience on Rate Hikes: Decision Day Guide
Jerome Powell will debut the Federal Reserve’s latest communications strategy — a press conference eight times a year — by emphasizing patience in raising interest rates, a message the chairman struggled to deliver in December. The Federal Open Market Committee is widely expected to keep rates unchanged in a 2.25 percent to 2.5 percent target range at the conclusion of a two-day gathering on Wednesday in Washington. Its policy statement due at 2 p.m. may alter a commitment to further gradual hikes. Thirty minutes later Powell will address reporters, inaugurating his new approach of holding a media briefing after every FOMC meeting. Almost eight years after then-Fed chief Ben Bernanke held the first press conference, officials believe these briefings bolster public understanding of the central bank. On the other hand, doubling their number raises the risk of gaffes. Stocks fell to a 20-month low in the days after Powell spoke on Dec. 19 as investors digested the Fed’s commitment to “some further gradual” rate hikes. A Bloomberg News report during that period that President Donald Trump had discussed firing the Fed chief also added to market unease. “We’re entering a tricky period for communications,” said Stephen Stanley, chief economist of Amherst Pierpont Securities LLC. “It was easy when the Fed was raising rates at every other meeting, but that is done and the Fed is pushing the idea of data dependence. In 2019, communications will get a lot more complicated.”
Europe Stays in Gloomy Mood as Germany Slashes Its 2019 Outlook
Euro-area confidence extended its worst losing streak in a decade and Germany’s government added to the pain by slashing its forecast for the region’s largest economy. With countries across the 19-nation currency zone facing a range of domestic risks and trade uncertainties, sentiment tumbled to the lowest in more than two years in a report Wednesday. Germany predicted its economy will only grow 1 percent in 2019, the least in six years. The euro area has turned into a weak spot of the world economy. The European Central Bank acknowledged risks have “moved to the downside,’’ and when the IMF cut its global growth forecast this month, Germany and Italy had the biggest downward revisions. In its German outlook, the government in Berlin downgraded its 2019 prediction to 1 percent from 1.8 percent, citing in part the deteriorating global trading environment. The report will fuel the pessimism about Europe after an almost non-stop deluge of disappointing economic indicators recently. And it may continue on Thursday, with figures forecast to show Italy probably slipped into recession at the end of 2018. GDP figures for Spain and the euro area are also due.
China’s Economic Woes Have Further to Spread Across Asia
China’s weakening economy is roiling export markets in the rest of Asia — and there’s more pain to come. From Hong Kong to Japan, exports data for December showed a marked downturn as supply-chain disruptions triggered by U.S.-China tensions and a cyclical slowdown in the world economy, led by China, hit the trade-reliant region. More bad news is in store for January: Bloomberg Economics’ early indicator shows China’s economy slowed further this month, while Thursday’s purchasing managers index is set to show another decline in factory output. Nikkei PMIs for seven of the region’s economies are due Friday, with four of them already in contraction or less than half a point from contraction. A separate business survey on Wednesday showed South Korea manufacturers’ confidence for February at the most depressed level since the global financial crisis a decade ago. Hong Kong’s worse-than-expected plunge in exports was telling for its broadly subdued demand from the rest of Asia, especially mainland China. Trade-dependent Singapore posted its biggest fall in exports in more than two years, while in Indonesia, the biggest economy in Southeast Asia, the drop in shipments was the worst since mid-2017. South Korea and Taiwan had a pair of ugly exports reports last week, and Japan followed with the second decline in four months. January data for Vietnam, where trade accounts for twice the nation’s gross domestic product, showed a 1.3 percent contraction in exports from a year ago, the worst performance in five years.
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