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June 19, 2019 | My Take on Jay Powell’s Decision to Not Change Rate Policy!

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian:

America’s Fed Chairman, Jr. Jerome Powell, has decided to wait on changing the Fed Funds Rate for now. This rate will remain at 2.25% to 2.50%. Most pundits seemed to expect a rate reduction as our economy seems to be slowing. Mr. Powell, however, has concluded that consumer spending is solid and that demand is steady and solid (at this time). This means that there will be no rate reduction for now. The stock market seems to view this as somewhat positive. The Dow Index is up some 79 points as I write.


My personal view is that Mr. Powell will change his mind and reduce rates come the July  FOMC meeting. The reality is that our real markets (such as manufacturing and real estate) are slowing significantly. I expect that come the July meeting we will witness Mr. Powell and his committee lowing rates. Mr. Powell is obviously a now person and his assessment is that our American economy is relatively strong as of today.


Reality changes daily, however, and my sense is that a few weeks will change his thinking. Mr. Powell desires to keep the 10 year expansion going and he will do what is necessary to change policy to accommodate this continuing expansion. The FOMC committee had mixed views on the strength of our economy but the consensus was that now is not the time to lower rates.


As I write the 10 year treasury bond rate is 2.028%. This suggests that investors think our markets are slowing and pursuit of safe-haven investments are needed. Just six months prior to today the 10 year rate was 3.24%. So within the past six months rates are coming down significantly even with no change in Fed policy. The 10 year rate means that mortgage rates also have declined significantly. All this suggests that our markets are slowing and that Mr. Powell may change his thinking by the time of the next FOMC meeting in July.


The big event that is coming in June is the meeting between Mr. Xi and Mr. Trump in Osaka, Japan. This meeting at the G-20 could change sentiment for all our markets. We live with psychological markets and fake money so volatility is assured in these markets. My sense is that a crash in the digital markets is on the horizon. I don’t witness the strength which Mr. Powell seems to recognize. But we each must think for ourselves on these issues.


Watch the markets and then develop your own view on what is happening. Have a good day! I am:

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June 19th, 2019

Posted In: Kingdom Economics

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