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You can find the current article at its original source at https://www.theguardian.com/business/live/2020/jan/29/hong-kong-stocks-slump-apple-house-prices-federal-reserve-rates-business-live
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| Federal Reserve calls coronavirus 'very serious issue' as it holds US interest rates - business live | |
| (31 minutes later) | |
| Rolling coverage of the latest economic and financial news | Rolling coverage of the latest economic and financial news |
| Q: Does climate change pose a system-wide risk to financial stability? | |
| It’s certainly possible over the long-term, Powell replies, but ultimately the issue must fall to elected officials. | |
| But he agrees that the Fed must ensure the financial system is prepared to withstand climate change. So yes, it’s part of its role -- but the Fed can’t take on responsibility for the whole issue. | |
| Q: So why haven’t you joined the Network for Greening the Financial System, with over 40 other central banks? | |
| Powell says the Fed has attended meetings, and will probably join in the future. | |
| Q: Various US companies are closing factories, bringing staff home or seeing supply chain disruption due to the coronavirus. So what impact could it have on US growth, and is it a significant risk to the global economy? | |
| Federal Reserve chair Jerome Powell says the coronavirus is a very serious issue, which has already caused significant human suffering. | |
| It is likely to cause some disruption to growth in China, and globally, he predicts. | |
| But it is “very uncertain” how far it will spread within China and to its neighbours, and thus what the impact will be. | |
| As such, Powell won’t speculate, but he does add: | |
| He also suggests that the global economy appeared to be picking up, due to easing trade tensions, the lower risk of a no-deal Brexit, and signs of manufacturing bottoming out. | |
| On the US economy, Powell says the labour market is still performing well.... and it’s a “bit surprising” that wages haven’t risen faster. | |
| Hmmm.... | |
| Powell is giving (well, reading out) a long answer on the Fed’s repo operation (buying short-term treasury bills with new money). | |
| He’s basically saying the Fed will keep running the programme until it has build up ‘ample reserves’ - of at least $1.5tn. | |
| Q: But aren’t you worried that the markets think your repo operation is QE, and are trading accordingly? | |
| Powell says the goal is simply to deliver effective monetary policy. It’s not the same as a broad asset-purchase programme (ie QE), and it’s hard to say what’s moving markets. | |
| Onto questions, and Powell confirms that the Fed has tweaked its language on the inflation target. | |
| It now states clearly that it wants to see inflation at 2%, not merely near it. | |
| Jay Powell (who may have a touch of the sniffles) says US inflation should move closer to the 2% target in coming months. | |
| We are determined to avoid inflation running persistently below 2%, he insists. | |
| He then confirms that the Fed will keep running its repo operations until April, but will ‘slow’ these purchases over time. | |
| Federal Reserve chair Jerome Powell is giving a press conference now. | Federal Reserve chair Jerome Powell is giving a press conference now. |
| He confirms that the Fed has left interest rates on hold today, adding that monetary policy is well purposed to serve the US economy, create jobs and get inflation on target (it’s currently 1.5%, below the 2% target). | He confirms that the Fed has left interest rates on hold today, adding that monetary policy is well purposed to serve the US economy, create jobs and get inflation on target (it’s currently 1.5%, below the 2% target). |
| Powell blames sluggish growth abroad, and trade tensions, for weak business investment and manufacturing. | Powell blames sluggish growth abroad, and trade tensions, for weak business investment and manufacturing. |
| But uncertainties remain, he adds, and there are risks to the outlook -- including the coronavirus outbreak. | But uncertainties remain, he adds, and there are risks to the outlook -- including the coronavirus outbreak. |
| Another small change -- the Fed has decided to keep lubricating the plumbing of the US financial system for a few more months. | Another small change -- the Fed has decided to keep lubricating the plumbing of the US financial system for a few more months. |
| This repo scheme, in which the Fed buys hundreds of billions of dollars of short-term bonds, was meant to expire in January - but will now run until April. | This repo scheme, in which the Fed buys hundreds of billions of dollars of short-term bonds, was meant to expire in January - but will now run until April. |
| The Fed insists it is simply providing liquidity, not stimulating the system.... but many investors have compared it to quantitative easing programmes launched after the crisis. And indeed, the scheme appears to have pumped up the stock markets (just like QE did). | The Fed insists it is simply providing liquidity, not stimulating the system.... but many investors have compared it to quantitative easing programmes launched after the crisis. And indeed, the scheme appears to have pumped up the stock markets (just like QE did). |
| The Fed has made a small technical tweak - raising the interest rate it pays banks on their excess reserves. That’s meant to keep interest rates within the Fed’a 1.5%-1.75% target. | The Fed has made a small technical tweak - raising the interest rate it pays banks on their excess reserves. That’s meant to keep interest rates within the Fed’a 1.5%-1.75% target. |
| There’s no mention of the coronavirus in the Fed statement. | There’s no mention of the coronavirus in the Fed statement. |
| That suggests the central bank isn’t too worrked about the epidemic, says Naeem Aslam, chief market analyst at Avatrade: | That suggests the central bank isn’t too worrked about the epidemic, says Naeem Aslam, chief market analyst at Avatrade: |
| Understandably, there’s not much market reaction to the Fed’s decision (which Bloomberg’s Mike McKee has astutely dubbed a ‘nothing-burger’). | Understandably, there’s not much market reaction to the Fed’s decision (which Bloomberg’s Mike McKee has astutely dubbed a ‘nothing-burger’). |
| The Dow Jones industrial average is up 166 points, or over 0.5%, at 28,889, having been 133 points higher just before the decision was announced. | The Dow Jones industrial average is up 166 points, or over 0.5%, at 28,889, having been 133 points higher just before the decision was announced. |
| The Fed also sounds upbeat about the state of the US economy, saying: | The Fed also sounds upbeat about the state of the US economy, saying: |
| The statement, explaining why US interest rates remain on hold, is online here. | The statement, explaining why US interest rates remain on hold, is online here. |
| Today’s decision is unanimous -- every Federal reserve policymaker decided to do nothing this month. | Today’s decision is unanimous -- every Federal reserve policymaker decided to do nothing this month. |
| And the FOMC’s accompanying statement looks nearly identical to December’s offering. | And the FOMC’s accompanying statement looks nearly identical to December’s offering. |
| As before, it says US jobs gains are solid while inflation is below target. | As before, it says US jobs gains are solid while inflation is below target. |
| One tweak -- the committee says household spending is rising at a ‘moderate rate’ (last month, it was ‘strong’). But it also reiterates that business fixed investment and exports remain weak. | One tweak -- the committee says household spending is rising at a ‘moderate rate’ (last month, it was ‘strong’). But it also reiterates that business fixed investment and exports remain weak. |
| NEWSFLASH: The Fed has left US interest rates unchanged, at 1.5%-1.75%. | NEWSFLASH: The Fed has left US interest rates unchanged, at 1.5%-1.75%. |
| Melissa Davies, Economist at Redburn, agrees that the Fed will be cautious today, partly due to the health crisis in China: | Melissa Davies, Economist at Redburn, agrees that the Fed will be cautious today, partly due to the health crisis in China: |
| It’s nearly time for the first US interest rate decision of 2020 - but don’t expect many fireworks. | It’s nearly time for the first US interest rate decision of 2020 - but don’t expect many fireworks. |
| The Federal Reserve is widely expected to keep its benchmark Fed Funds rate unchanged, at 1.5% to 1.75%. | The Federal Reserve is widely expected to keep its benchmark Fed Funds rate unchanged, at 1.5% to 1.75%. |
| Following three cuts in the second half of 2019, the Fed is effectively on hold - waiting to see how the economic data plays out. | Following three cuts in the second half of 2019, the Fed is effectively on hold - waiting to see how the economic data plays out. |
| Although trade tensions have eased, the coronavirus crisis is a new threat to global growth - so central bankers will remain cautious. | Although trade tensions have eased, the coronavirus crisis is a new threat to global growth - so central bankers will remain cautious. |
| Coronavirus worries have kept a lid on the London stock market today. | Coronavirus worries have kept a lid on the London stock market today. |
| The FTSE 100 index has closed just 2 points higher at 7,483 - still 100 points down this week after Monday’s troubles. | The FTSE 100 index has closed just 2 points higher at 7,483 - still 100 points down this week after Monday’s troubles. |
| Connor Campbell of SpreadEx blames the risk of a Chinese slowdown: | Connor Campbell of SpreadEx blames the risk of a Chinese slowdown: |