Press comment: Fed rate cut aimed to get executives spending, rather than help consumers
Following news that the Federal Reserve has cut interest rates by 0.25% to a target range of 2% to 2.25%, please see the below commentary from Hinesh Patel, portfolio manager at Quilter Investors.
“Despite being priced into the market this rate cut by the Federal Reserve, the first in a decade, is an historic moment for the global economy. We have not seen a cut of 0.25% from the US since the 90s so it is clearly a rarity. Federal Reserve Chairman Jerome Powell has signalled that he and his team are looking to manage the US economy through what could be a turbulent few months and is implementing an insurance policy against a possible economic downturn.
“The comparisons to the 90s are apt, as much of the macro data we see now is similar to that period, and it is clear Powell is looking to provide the economy with a comparable soft landing as trouble remains on the horizon.”
“As there were two dissenters in the committee, as well as Donald Trump’s predictable outburst on Twitter, the use of uncertain language by Powell is important going forward as he looks to balance the needs of the US versus that of the global economy. This is mid-cycle adjustment can be interpreted as one to respond to global issues while US data remains stable. This move has added two-way risk back into the market and is an attempt to encourage executives to spend and invest, rather than helping consumers. The paradox here is that corporate leverage is already very high and the “hawkish cut” could actually end up tightening financial conditions ahead”
For more information contact:
Gregor Davidson on 07917 522784
Mike Glenister on 07469 144 535
Notes to Editors:
Quilter Investors is part of Quilter plc. It provides multi-asset investment solutions designed for advised clients in the UK and internationally and manages £19.2 billion on behalf of its investors (as at 31 March 2019).
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- Charles Derby Group (becoming Quilter Financial Advisers)
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- Quilter Investors
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- Old Mutual International (becoming Quilter International in 2020)
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