The Fed’s message in 8 points

The Federal Reserve message is clear:

1- Macro data remain robust and expected inflation is low

2-Risks on the economic prospects are on the upside

3 – The Fed will adjust its rate if necessary but nothing is on the agenda

4 – The dots’ graph doesn’t give information as it shows one drop in 2020 and one hike in 2021

5 – Powell introductory statement indicates a bias on the downside for the Fed’s rate in the future.

6 – Long term rates dropped on this perception even if nothing has been said on the agenda. The 10y is now below 2% and the 30y below the fed funds rate for the first time in this cycle

7 – In the past, when all rates are below the Fed’s rate it’s a signal of recession. The drop in the Fed’s rate will come but will not be sufficient to avoid a recession.

8 – The reason is that low long term interest rates reflect low expectations on the future. They can’t reverse spontaneously. Economic phenomena are persistent

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