Many market participants hoped for further information from the central bank conference in Jackson Hole as to whether the latest adjustment in the middle of the economic cycle would not develop into a full-blown key rate reduction cycle after all. Fed Chairman Powell, however, did not want to commit himself and gave no concrete indications of the future path of monetary policy. On the other hand, he was open to the idea that there was no manual for dealing with the current trade conflict. This in turn points to a high degree of uncertainty in the FOMC itself. In my view, it is relatively certain that key US interest rates will continue to fall in the course of the year. The exciting question, however, is whether further rate cuts will have a positive effect on the real economy at all, or only boost the financial markets.
Political pressure on the US Federal Reserve has also increased further. After Trump, Powell is now an enemy – but you don’t know exactly for whom or what. It is unclear to what extent this will play a role in the near future. However, it is very likely that the discussion about a possible replacement of the current head of the Fed will regain momentum. In addition, the monetary policy council in the Fed (FOMC) will change noticeably in the coming year. As part of the regular rotation of voting rights, some members of the FOMC now have voting rights that have clearly spoken out in favour of further interest rate cuts, whereas members who have expressed themselves more cautiously here lose their voting rights. This makes it more likely even under Powell that the Fed will speak out more clearly in favour of interest rate cuts in 2020. All in all, we can therefore expect interest rates in the USA to fall further.