Jerome Powell certainly imagined it differently. At an extraordinary meeting yesterday, the Federal Central Bank’s Federal Open Market Committee passed a 0.5% rate cut.
Hardly announced, the stock markets are falling. S & P500 minus 2.8%, Dow and Nasdaq minus 3%.
How
could something like that happen?
First
once: Federal Reserve emergency unplanned rate cuts
are rare. After the September 11 terrorist attacks, there was
before (50 basis points), then at the beginning of the financial crisis in August
2007 by 75 basis points.
Finally
again in January 2008, the subprime hut was already burning there
lichterloh, shortly thereafter one last time in October 2008 after the
Lehman collapse, 50 basis points each.
So
September 11th and three times financial crisis – and now.
Because of
the corona virus. That is amazing. Because the markets are round
Fell 10% in a short time, but from new all-time highs.
Anything
must have troubled the Federal Reserve so much that it didn’t
can wait another two weeks until the regular meeting.
And
then she even fires “two
Cartridges ”at once (everything here and
instead of announcing today first and then to
regular meetings of March 18 and April 29 each once 0.25%
three possible “good news”).
Lag
it on the extremely inverted yield curve that occurred during the last
Days already two rate cuts “requested” in March
would have? (Probable interest bands visible in the CME
Fedwatch tool.)
Or
Powell has become permanent Trump tweets
let intimidate?
Or
but are the expected effects of the coronavirus pandemic
worse for the global economy than we are currently
is made to believe?
In front
The virus arrived in Europe ten days ago, very massively in Italy, where the
Cases rose from three to over 150 in one weekend, however
also in Germany and Italy.
The
was a shock. Then there were in the markets last week
a bloodbath. The fastest
Crash from all-time high into a correctionthere has ever been. In just
6 days. Severe uncertainty spread.
On
Call of the G7 – with the American finance minister Mnuchin as
Chairman – as well as a conversation with the Eurozone finance ministers
ECB chief Lagarde should ensure calm (Reuters).
With
big guns you wanted the effects of the corona virus
limit the economy. “There
will be a concerted action, ”said the French finance minister
Le Maire confident on Sunday.
To
a manic Monday rally on Wall Street found that
G7 call then yesterday, Tuesday morning, instead. Was determined
the Federal Reserve’s plan was also discussed. The safest
The way to calm the markets had to be a Fed rate cut.
As possible
quickly and as large as possible, i.e. 50 basis points.
Short
the step was announced before the European market closed:
Minus 0.5% immediately, without delay.
And
Powell stepped in front of the microphones in a short-term meeting
Press conference. However, he worked more insecure
than usual, Somehow in the wrong movie.
To
the market knew only one direction. Downward.
Pretty steep indeed. Over half of Monday’s recovery rally
was back in the air by the close of trading in New York
dissolved.
For
the Federal Reserve and the G7 a nightmare. Not only do they have
now two out of just 6 remaining US interest cartridges for nothing
fired, but also damaged their savior image.
The
Corona pandemic relentlessly reminds us that the
Central banks are pretty much without clothes.
On the one hand
there is a huge contradiction in the Fed storyline. It will be us
constantly tells that the economy is doing well, at the same time
the Fed has already cut interest rates three times in 2019.
The
The same also in Switzerland. The economy is running
Great, but the SNB intervenes in the currency that the
Bend the beam.
Further
becomes the overnight repo market in the United States since
September supported daily, Without these measures, the
World economy patient apparently not viable.
So
what does “strong” mean here?
Where would we be without all of these interventions?
–
In
This contradiction occurred again yesterday in the press release
clearly.
Fundamental
everything is fine, but we are now doing an emergency rate cut
immediately 50 basis points and support the economy with ours
“Toolbox”.
So it just doesn’t make sense. And that is dawning the markets more and more.
And
Much worse: The interest rate cut hammer that every Federal
Reserve Chairman from the Fed toolbox over the past few years
got out to get the business machine going again
bring, hardly helps in a hospital.
Nice
not at all in the intensive care unit.
The
Virus spreads rapidly outside of China. At the
Sunday, February 23, exceeded the diagnosed
Ex-China falls just the threshold of 1,000, Switzerland
appeased at that time.
Today,
10 days later, there is about
10,000 cases outside of China.
and also in Switzerland now beautiful
37,
–
How is Powell supposed to help with his toolbox? The market knows that it cannot develop a vaccine.
Lower
Interest rates hardly lead to fewer events being canceled
or flights are taken. Chinese tourists can
Fed also do not conjure up the Bahnhofstrasse.
The
Switching to alternative suppliers will also not be the result
relieved that you can get into debt more cheaply.
Coming
not a miracle, the global economy will slip into the 2020
Recession. And then it looks more and more for the markets
one Worst
Case scenario out.
Also
Zero interest rates or a next security purchase program the
The US Federal Reserve – quantitative easing – will hardly help.
The
perfect storm looms. A demand and supply shock. And the
Fed Kaiser is nude.
similar posts
–
