Listen: Fed holds rates steady, but opens the door for a rate cut in the future
"The Federal Reserve indicated a readiness to cut interest rates for the first time in more than a decade to sustain a near record US economic expansion, citing uncertainties in their outlook while chairman, Jerome Powell and fellow policymakers left their key rate in the range up two and a quarter percent to two and a half. They dropped a reference in their statement to being patient on barring costs and forecast. A larger miss of their two percent, inflation target this year, so June. For more insight, Bloomberg's Carol Massar and Jason Kelly spoke with Petri spa of Hamco, and IRA jersey. The chief interest rate strategist for Bloomberg intelligence. Let's get to you. Tell me what dump sad at you. What you think is really notable in this latest fed decision, and there was a like mixed thinking going into it in terms of investors the street and now we see in the feds got of mixed thinking, so I think firstly the fed did not disappoint. So the. The market was certainly pricing for the fed to be dovish, and they were I think, just appropriately dovish, I think there was the big risk and a lot of people were thinking that maybe they would take back some optionality and not be as dovish as the market thought, but I think between the dot plot and what they said in the statement, they kind of just met the market's expectations, not a whole lot more, and you do see a little bit of a market reaction because the thing is if the feds little dovish now they could get more. Dovish later so push pests qualley from pimco big takeaway for you. The fed is keeping its options open, if not, it's not going to cut until it sees something bad, because it's trying to save bullet. That's you know, for me if they go number one and number two, if that chairman Powell is very much aware that all I on him where every word every north one just going to dissect it and to extent that he is coming across more hawkish, and painted market sentiment could turn pretty quickly and put your one of the things I wonder is the sort of geopolitical backdrop here, you know, we're heading into a week. We ten days where present United States is going to be a soccer Japan meeting with his counterpart from China, president Xi. Those trade winds certainly are playing through this economy right now. How do you balance that out? If you're an investor what we heard from the fed today, and what we're hearing from a geo economic perspective, investors, look at potential trade war, and, you know, and on the other side of the fed standing by to support the economy. All the good news seems to have been priced in meaning that the market is under subpoena cups by your end that seems to be. Conclusion market is also anticipating that trade war with China is going to be averted same with Mexico yesterday. We saw that after the tweet from the president the market, but he strongly all of these good news have been priced in. But the question is, if the meeting for whatever reason does not go well, or we wake up to tweet that is hostile to China, that does issues are real and they haven't been priced in. So my sense stat investors are still very often, but it's best to consider caution going forward, especially where pricing in the market. I mean I do think about and, and, you know, I think about g twenty right? It's not this weekend next weekend. I do wonder if we get some resolution on some of these as folks around this table have have have termed policy gaps. Right. If we get some resolution between China and the United States. How that think how might that impact the fed? Thinking what it means for interest. I think that's one of the ironies here is that a lot of the angst and a lot of the certainly the market worry and market. Fear is really predicated on things that are, you know, quote unquote, manmade. Right. So these are actually policy decisions at someone can make. So if there is a kind of blanket resolution with all of the different trading that have been going on with the White House and other countries. All of a sudden, you can see not only risk assets do okay, but also quite frankly, the bond market selloff pretty significantly so compared to where the economy is already very rich to fair value. At least where we as the make fair value to be, so you can wind up seeing a pretty big pullback here. And actually, the fed may be take back a little bit of its dovish nece, as well, assuming that these trade problems go with you agree with that. Yes. Especially the last point, where between policy and removal of trade war with the moving in different direction. Meaning that should we receive bad news. News. You know, on trade fed will step in, but should we receive good news on trade? Meaning no-trade war, many people say, oh, that's going to be hugely positive, but consider that if we receive good news on the trade war front that the fed actually has room now to step back and said, we don't need to cut rates because, you know, the economy has been removed or reduced poetry Smalley of Pam, co an IRA jersey. The chief interest rates strategist for Bloomberg"