The Fed is the investor’s friend after all

Fed chair Jerome Powell

A few tweets from the Tariff man, an equities correction as close to a bear market as makes no difference, and suddenly the Federal Reserve has changed its tune.

In a speech on Wednesday, Eric Rosengren, president of the Boston Fed, talked up the generally optimistic forecasts of economists in contrast to the sour tone of financial markets recently. 

But he also conceded: "If the pessimism evident in financial markets eventually shows through to economic outcomes, there would be less need, and perhaps no need, for further increases in interest rates." 

Who says jawboning the Federal Reserve doesn’t work? This is a decidedly different message from December when the Fed raised rates, even as it cut its projections for 2019 to two further likely 25bp increases in the Federal fund rates, from three previously indicated.

James Bullard, president of the St Louis Fed, went even further, telling the Wall Street Journal even as Rosengren spoke at the Boston Economic Club, that the US central bank is “bordering on going too far and possibly tipping the economy into recession” if it continues to raise rates.