NEWS: Fed officials believe inflation expectations are weakening

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Although Fed officials basically believe that the trade war so far is unlikely to derail the US economic expansion, they also stressed on Monday that the long-running US-China trade war is another matter that may require the Fed to make a certain Kind of response.

"If the impact of tariffs -- and any reaction of financial markets to these tariffs -- leads to a slowdown, we have tools available, including lowering interest rates," Rosen Glenn, president of the Federal Reserve Bank of Boston, told Reuters on Monday. . This year Rosen Glenn has voting rights in the Federal Reserve Interest Rate Decision Committee.

Although Rosengren said that he "does not necessarily" think it is necessary to cut interest rates, the financial market fell sharply on Monday, which may disrupt the Fed’s core expectation that interest rates will remain unchanged for some time to come.

Major US stock indexes fell 2-3.5% on Monday, bond investors sharply raised their bets that the Fed will be forced to cut interest rates this year. The long-short bond yields that have received much attention have turned negative, and some officials believe this is a sign of weaker confidence in the economic outlook.

After the Sino-US talks broke down last week and the tariff threats rose, there are more reasons to believe that such tensions will continue for a while.

“If this is the worst scenario scenario and the tariffs increase over time, then the situation may change and may have a real impact on US GDP growth,” said President of the Federal Reserve Bank of Minneapolis. Neel Kashkari said on CNBC.


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