Forex Marketz Daily Forex News – Fully Markets Update
Well that was a shocker. The United States Federal Reserve Bank (Fed) through their Federal Open Markets Committee (FOMC). The Elected to leave rates the same and economic policy unchanged. However, they did surprise us a little bit.
We are not 100 percent sure, but they gave us a third mandate.
In the FOMC statement, released to the press, there is a statement which reads “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.” This is an amazing and very interesting statement to say the very least.
So interesting and powerful, that Federal Reserve Chair reiterated this exact statement in here press conference. She stated the slowing Chinese economy as a big factor as they made their decision. She also made a statement on future risk that said, that there is more of an “a more abrupt slowdown than some analysts expect.”
So now the Fed has three mandates. Two we are one hundred percent sure of.
- Job Creation
- Control inflation
- Everything else that can impact the US economy from global economic conditions and financial developments of any kind.
This could be a figment of our imagination or a gross exaggeration of what everyone read and heard. It could be that the Fed is not introducing a third mandate but acknowledging that there is a globally connected economy. That is a likely argument.
There is a practical reason behind the Fed as well. No matter what they say, they do not want a strong US Dollar. Why? A strong Dollar has negative impacts on corporate profits and hiring (labor force).
However, they have now introduced the global economy as a decision maker. This is definitely a new path for them. How else do you explain that statement? You keep rates low until world stock markets turn around? How do you define the factors for that? Is the US now dependent on global data like the Chinese gross national product (GDP)?
The real problem here is when the Fed acts like the world’s banker.
