US Federal Reserve Chairman Jerome Powell told reporters after the Federal Reserve cut interest rates in an emergency move to protect the world’s largest economy from the effects of the coronavirus. , during a press conference in Washington, USA, March 3, 2020.
Kevin Lamarque | Reuters
The Fed̵7;s two-day meeting is slated to end on Thursday with no new statements from the central bank and Chairman Jerome Powell is sure to steer clear of the election uncertainty.
But he may be asked about one of the most pressing concerns on the market – the fiscal stimulus to help the economy recover from the effects of the coronavirus. That topic was already a political hotspot, and it can be tackled in many ways depending on the course of the election.
Julian Emanuel, equity and derivatives strategist at BTIG, said: “With a majority in the GOP Senate, expectations for the full stimulus are recovering, which is part of the reason why yields are falling like present”. The yield on a 10-year Treasury note jumped from a high of 0.94% on Tuesday night to around 0.75% on Wednesday.
Strategists say the Fed will not resolve the election, the unresolved election Wednesday afternoon with results in several key states uncertain.
Powell will likely be asked about a need for a financial stimulus that Congress did not put up before the election. On Wednesday, Senate Majority Leader Mitch McConnell reopened the subject, saying it was important to pass a package before the end of the year.
“Powell himself has made it very clear that the most important thing is to put cash in people’s hands. I think he has to [comment], and I think it could be a negative market, given the rhetoric that reinforces the limited effectiveness of the Fed’s toolbox tools, ”says Emanuel.
Fed officials have repeatedly called for stimulus but Powell may not address it unless he is asked by journalists about it during his 2:30 pm ET press conference, strategists said.
House and White House Democrats negotiated a large package with the House of Representatives seeking $ 2 trillion, but those talks were stalled ahead of the election. McConnell and Senate Republicans were looking for a much smaller package.
The election is seen by some as a potential solution, as Democrats, if they win the Senate, are expected to pass a large package early next year. But a change in control seems unlikely.
The Fed is also said to reiterate its “lower interest rate policy for the longer term” and it is willing to use all its tools to help the economy. Otherwise, it is difficult for Powell to bring up any new issues in the meeting after the meeting.
“I think if they move the market, they make a mistake,” said Jim Caron, head of global macro strategy at Morgan Stanley Investment Management. “Their job is to blend into the background at this point.”
The Fed took its most recent major policy step at its last meeting, introducing a new approach to targeting a range of inflation rather than the previously set target of 2%.