The direction of the Fed is under question and scrutiny this week as President Trump again expresses his frustration and before Chairman Powell speaks later today.
Which way will the Fed go?
There have been a lot of questions and theories posed in the past week after Federal Reserve Chairman Jerome Powell signaled that the FOMC may pause rate hikes in the spring.
As a result, the comments and speeches of members of the Fed are being watched closely by investors.
In an interview with the Washington Post Tuesday, President Trump reiterated his dissatisfaction with Powell, saying “So far, I’m not even a little bit happy with my selection of Jay.”
Trump believes the work done by his administration to improve the economy is not being accommodated by the Fed raising rates.
There are reports that Treasury Secretary Steven Mnuchin was taking a poll back in October during privates discussions with investors and bond dealers, asking if they want the Fed to raise rates or tighten monetary policy by cutting its securities portfolio.
Later today, we’ll see if we can analyze Powell’s speech at the New York Economic Club to indicate any direction, or a response to Trump however unlikely.
The dollar is steady ahead of Powell’s speech at 12 p.m. EST. EUR/USD is hovering around 1.128.
U.S. data points to slower growth
As the next move by the Fed is highly debated, many look to the data for answers. As of late, macroeconomic data out of the U.S. is showing an economy that is cooling off.
On Tuesday, the core personal consumption expenditures – an indicator of inflation – for Q3 missed estimates of 1.6% growth, instead hitting 1.5%.
The trade deficit for the U.S. grew to $77.25 billion in October from $76.04 billion in September. The second reading of the Annualized GDP for Q3, however, remained steady at 3.5%.
Trump, trade and more tariffs
President Trump is set to meet with Chinese President Xi Jinping Saturday night for dinner in Argentina after the G20 Summit.
The pivotal talk could indicate whether U.S.-China trade relations will get better or worse. Ahead of the dinner, Trump and his team are indicating that they are prepared for relations to get worse.
White House Economic Advisor Larry Kudlow, speaking at the press podium Tuesday, said the U.S. is prepared to enact more tariffs against China if the meeting doesn’t go well.
Trump is also floating the idea of imposing tariffs on auto imports as early as next week. The U.S. Commerce Department has not yet delivered its report on the topic to the President.
The auto-import threat comes after General Motors announced plans to shut down five factories and lay off more than 14,000 workers. Trump has expressed his dismay with GM, and tweeted that he is looking at cutting all subsidies to the automaker.